In California, employees can sue certain individuals for money that their employers owe them. But a recent decision by the California Supreme Court limits the avenues for that type of recovery.
First, the good news: California Labor Code section 558.1 allows “person[s] acting on behalf of an employer” to be held liable as the employer for violating any provision regulating minimum wages or hours and days of work in any of the Industrial Welfare Commission wage orders. This section also applies to the following Labor Code sections: 203 (failure to pay wages due at the time of termination); 226 (failure to provide proper wage statements); 226.7 (failure to provide meal and rest breaks); 1193.6 (failure to pay minimum wage); 1194 (failure to pay minimum wage) and 2802 (failure to reimburse for business expenses).
What is California Labor Code Section 558.1?
Labor Code section 558.1 defines the terms “other person acting on behalf of an employer” as including any of the following:
A natural person who is an owner, director, officer, or managing agent of the employer.
Additionally, an employee can try to use to the theory of alter ego liability in situations where the officers or directors of a company have abused the corporate form. See, e.g., Sonora v. Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 538. However, generally speaking, that theory of liability is difficult to prove.
Now, the not-so-great news: In Voris v. Lampert (August 15, 2019) —P.3d—, the California Supreme Court held that employees could not bring conversion claims for unpaid wages. “Conversion” is a tort, and allows plaintiffs to sue individuals. It also allows them to recover emotional distress damages as well as punitive damages under certain circumstances.
In order to prevail on a claim of conversion, a plaintiff must prove each of the following:
- An ownership or right to possess personal property;
- Defendant’s disposition of property in a manner inconsistent with plaintiff’s property rights; and
- Resulting damages.
Significantly, a plaintiff does not need to show that the defendant knew about the conversion in order to prevail on that claim.
In Voris, the plaintiff sued three companies as well as Lampert, an individual, for unpaid wages. He won on all three claims, but could not recover any money from the companies because they apparently had no assets or funds. So he focused his attention on Lampert and sought to recover from him individually.
The California Supreme Court began its analysis by recognizing the problems created by nonpayment of wages. The Court also underscored that “prompt and complete wage payments are of critical importance to the well-being of workers, their families, and the public at large.”
Turning to the caselaw, the Court noted that no precedential decision had resolved the question of whether an employee could bring a conversion claim for nonpayment of wages. The Court concluded that the tort of conversion was not the best tool for pursuing such wages. The Court then pointed to Labor Code section 558.1 as a better instrument for that purpose. For these reasons, the Court held that California employees may not seek unpaid wages via a claim for conversion.
The Court left open the possibility that employees seeking to recover gratuities (tips) that are unlawfully withheld by an employer may be able to bring a claim for conversion. See, e.g, Lu v. Hawaiian Gardens Casino, Inc. (2010) 50 Cal.4th 592 (noting that such employees might “under appropriate circumstances” be able to bring a claim for conversion). The Voris court noted that a claim for misappropriating tips is different than a claim for unpaid wages, because, among other things, a tip is a specific sum of money that belongs to the employee and is capable of identification.
Finally, wages are the property of employees once they are earned. See, e.g., Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163. Therefore, in certain circumstances, an employee may be able to sue for stolen wages under California Penal Code section 496, which provides as follows:
Every person who buys or receives any property that has been stolen or that has been obtained in any manner constituting theft or extortion, knowing the property to be so stolen or obtained, or who conceals, sells, withholds, or aids in concealing, selling, or withholding any property from the owner, knowing the property to be so stolen or obtained….
Section 496(c) allows for a civil action to recover such property:
Any person who has been injured by a violation of subdivision (a) or (b) may bring an action for three times the amount of actual damages, if any, sustained by the plaintiff, costs of suit, and reasonable attorney’s fees.
The attorneys at Hunter Pyle Law have successfully brought claims on behalf of thousands of workers for unpaid wages. If you have questions about your wages, please feel free to contact us for a free and confidential intake process. We can be reached at (510) 444-4400 or at inquire@hunterpylelaw.com.