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Individual Employees Can Be Liable For Civil Penalties and Attorneys' Fees For A Company's Failure To Pay Overtime And/Or Minimum Wages

By Laura Kastetter and Don Samuels

Notwithstanding two previous California Supreme Court decisions which essentially held that “[u]nder the common law, corporate agents acting within the scope of their agency are not personally liable for the corporate employer’s failure to pay its employees’ wages,”  Reynolds v. Bement (2005) 36 Cal.4th 1075, 1087, and Martinez v. Combs (2010) 49 Cal.4th 35, 66 (limiting liability for wage claims to the actual employer and not its agents), the California Court of Appeal just held that  individual employees can be liable for civil penalties and attorneys’ fees for a company’s failure to pay overtime and/or minimum wages.

In Atempa v. Pedrazzani (September 28, 2018, D069001) ___ Cal.App.4th ___ [2018 WL 4657860], the Court of Appeal, Fourth Appellate District, distinguished both Reynolds and Martinez and held that individuals can be liable for civil penalties under California Labor Code section 558, subdivision (a) (relating to overtime) and Labor Code section 1197.1, subdivision (a) (relating to minimum wage) through the Private Attorneys General Act (“PAGA”) (Cal. Lab. Code, § 2699).

The Court held that the plain meaning of Labor Code sections 558(a) and 1197.1(a) imposed liability for civil penalties on an “other person” acting on behalf of an employer.  Having established that an individual under the circumstances described in the case could be individually liable for civil penalties, as contrasted to the underlying wages, the Court relied on PAGA to allow a private attorney to collect those penalties (75% to the state and 25% to the aggrieved employees) and to collect attorneys’ fees of $315,014 pursuant to PAGA (Lab. Code, § 2699, subd. (g)(1)).

CORPORATE EMPLOYEES NEED TO BE MINDFUL OF INDIVIDUAL LIABILITY FOR CIVIL PENALTIES ARISING FROM VIOLATIONS OF CALIFORNIA’S WAGE AND HOUR LAWS

Notwithstanding the California Supreme Court’s determination that individuals, absent alter ego liability, are not liable for wages owed to a company’s employees, the Pedrazzani case establishes that corporate individuals can be held personally liable for civil penalties underlying the statutes requiring that employees be paid overtime and a minimum wage.Additionally, they can be held personally liable for attorneys’ fees resulting from an employee’s successful pursuit of those civil penalties under PAGA. It is unclear whether those payments ultimately will be paid by the company, if it hasn’t gone bankrupt, pursuant to California Labor Code section 2802.