California Employers Could Face Jail Time For “Wage Theft”
Among the flurry of recently adopted California state employment legislation was Assembly Bill (AB) 1003, that added a new section to the state’s Penal Code dealing with “wage theft” by employers. Under AB 1003, which Gov. Gavin Newsom signed into law on September 27, an employer accused of intentionally depriving an employee of wages or gratuities can now be prosecuted for “grand theft” with potential jail time. This new threat of prosecution is in addition to any traditional civil penalties that may be imposed on an employer under existing California law.
What Is “Grand Theft”?
The Penal Code defines grand theft as unlawfully taking someone’s money, labor, or property, with a value of $950 or more. AB 1003 clarified that “intentional theft of wages” falls within this definition of grand theft. More precisely, an employer’s theft of at least $950 in wages from a single employee during a consecutive 12-month period is grand theft, as is the aggregate theft of $2,350 from two or more employees.
What Payments Are Considered “Wages” Under AB 1003?”
AB 1003 defines wages to include both money paid directly by the employer to an employee for services rendered, as well as any gratuities received by that employee. A gratuity is broadly defined under Section 350 of the Labor Code as “any tip, gratuity, money, or part thereof” left for an employee by a patron “for services rendered or for goods, food, drink, or articles sold or served to the patron.”
To put it in simple terms, the owner of a bar or restaurant who takes, or allows a manager to take, employee tips can now be prosecuted for grand theft if the tip value meets the minimum thresholds described above. Similarly, if an employer unlawfully withholds employee pay, the employer now runs the risk of being prosecuted in criminal court, even if they believes they had a “good reason” for not paying the employee on time.
What About Independent Contractors?
For purposes of this new grand theft law, it does not matter if the affected worker is classified as an employee or an independent contractor. AB 1003 makes this explicit: An “employee” includes an independent contractor. More importantly, under AB 1003,the hiring entity of an independent contractor is considered an “employer.” So, if you are an employer whose business relies on the work of independent contractors, you could be held criminally responsible for that contractor’s intentional theft of wages.
How Does This Affect Civil Liability?
Nothing in AB 1003 prevents the California Labor Commissioner from exercising its traditional powers to initiate civil actions against employers who violate the state’s wage and hour laws. And in fact, many Labor Code violations were already classified as criminal misdemeanors even before this new legislation. The difference is that grand theft is a felony in California, so a successful prosecution could mean a jail term of up to 3 years for an employer, i.e., the owner or person found guilty of the theft.
If you have additional questions or concerns about this new law and would like advice from a Riverside County & Coachella Valley employment lawyer representing employers, contact the Law Office of Karen J. Sloat, APCtoday.