Wage theft, or the failure to pay all wages due, is a serious problem. Studies show that up to $50 billion in wages go unpaid every year in the United States, and even workers who get court judgments for unpaid wages find it hard to collect on them. One reason for this state of affairs is that the law makes it relatively easy for individuals to hide behind corporate status and/or corporate shells in order to protect their assets.
A 2018 California court case clarifies that workers in this state have an important tool that allows them to bring suit against individual business owners for unpaid wages. In Atempa v. Pedrazzani (2018) 27 Cal.App.5th 809, the court held that two former employees could sue the owner of the restaurant at which they had formerly worked for unpaid wages. The court reached this decision despite the fact that the owner had created a corporation that was technically the employees’ employer.
The employees in Atempa brought their claims under California’s Private Attorneys General Act, or PAGA. PAGA provides that employers and other persons acting on behalf of an employer are liable for unpaid wages. In particular, PAGA allows employees to recover unpaid wages and penalties under California Labor Code sections 558 and 1197.1. Both of those statutes provide that individuals can be held liable for failure to pay wages due.
For example, Labor Code section 558 provides that “[a]ny employer or other person acting on behalf of an employer” can be held liable for unpaid wages. And Labor Code section 1197.1 provides that “[a]ny employer or other person acting either individually or as an officer, agent, or employee of another person” can be held liable for failure to pay the minimum wage for all hours worked. However, these claims can only be brought through PAGA, which provides for a private right of action to enforce and collect the wages and penalties due.
In Atempa, the court held that under the clear language of sections 558 and 1197.1, both the employer and a person who causes wages to be unpaid are subject to penalties. The court further held that that liability exists regardless of the business structure of the employer. In other words, the fact that the employer may have incorporated does not protect the individuals behind the corporation from liability.
That holding proved to be particularly important in Atempa because the corporation that had employed the employees who brought the lawsuit went bankrupt. Fortunately for those employees, under California law they could sue the man behind the corporation.
The attorneys at Hunter Pyle Law have handles many different types of wage claims, including class actions, in courts throughout California. If you have questions about your wages, please feel free to contact Hunter Pyle Law and to use our free and confidential intake process. We can be reached at (510) 444-4400, or at firstname.lastname@example.org.