California AB 1003 Bill: What It Means for Employers

California AB 1003 Bill

On September 27, 2021, California Governor Gavin Newsom signed Assembly Bill 1003 into California law.

The new 1003 2021 Assembly Bill establishes that intentional theft of an employee’s wages or tips is punishable as grand theft. The bill took effect on January 1, 2022.

AB 1003 pumps up the volume on California’s punitive approach to wage and hour violations.

The overall purpose of AB 1003 is to add California Penal Code Section 487(m) to 1003, meaning that the intentional theft of employee wages in California is no longer punishable as a misdemeanor but as a felony.

Before AB 1003, California classified wage and tip violations as misdemeanors.

AB 1003 imposes harsh penalties for intentional wage theft. The bill imposes even harsher penalties and jail time for owners, managers, and executives.

These legislative changes from a misdemeanor to felony wage theft charges should give all employers pause. AB 1003 sends a clear message that employers must take wage theft more seriously.

Wage Theft California

AB 1003 defines “theft of wages” as an intentional and unlawful denial of wages, gratuities, benefits, or other compensation by an employer who knows the wages, gratuities, benefits, or compensation are owed to the employee by law.

This provision applies to theft from both employees and independent contractors.

The California Labor Commissioner’s office lists numerous examples of wage theft, including,

AB 1003 explicitly authorizes employees to recover wages, gratuities, benefits, or other compensation subject to prosecution as restitution.

This authorization, however, does not prohibit an employee or the Labor Commissioner from commencing a civil action.

Nor does it prohibit employees from seeking other remedies provided under the Labor Code.

Grand Theft of Wages Under AB 1003

Under the new AB 1003 California wage theft law, grand theft of wages is a more serious crime than simple wage theft.

Grand theft of wages is defined as “an intentional theft of wages, including gratuities, in an amount greater than $950 from any one employee, or $2,350 in the aggregate from 2 or more employees, by an employer in any consecutive 12-month period.”

AB 1003 thereby increases wage theft penalties and creates California Penal Code Section 487(m). 

Prosecuting Wage Theft Under AB 1003

Now that intentional wage violations constitute a felony under AB 1003, California prosecutors are more likely to investigate wage theft and take legal action against employers.

Access to felony charges also gives California prosecutors more to work with during wage theft investigations. Search warrants and the use of grand juries are now at a prosecutor’s disposal.

Furthermore, prosecutors now have the authority to decide whether to charge an employer with:

  • A misdemeanor (amounting to imprisonment in a county jail for up to 1 year);
  • A felony (amounting to imprisonment in county jail for 16 months or 2 or 3 years); or
  • Or some combination of both.

The word “intentional” is an essential lens through which to examine an employer’s actions. An employer may engage in wage theft, but not all wage theft will be intentional.

Failure to pay overtime may be an oversight. Improper break period practices may boil down to employee-employer miscommunication.

However, refusing to honor an agreed-upon hourly rate of pay would likely be intentional.

While AB 1003 doesn’t precisely define “intentional” wage theft, employers would be wise to re-examine both their employee and independent contractor compensation policies and practices.

After thoroughly examining these policies, employers should take all needed corrective measures to avoid prosecution. 

Mitigating Wage Theft Under AB 1003

Employers should consider providing wage and hour law training to supervisors and managers. Training can help ensure management is familiar with wage and hour law basics.

Moreover, training can help management identify wage and hour risks that may engage HR.

An employer might also consider offering HR and non-management employees training sessions, so employees understand the new wage laws. 

California employers could also do the following to minimize liability:

  • Require employees to verify their timesheets;
  • Ensure guidelines are in place requiring all payroll errors be brought to the company’s attention and corrected;
  • Examine all independent contractor agreements and invoices; and
  • Track the payout of all tips and bonuses.

Hopefully, AB 1003 will motivate California companies to conduct regular wage and hour reviews.

Employers can also evaluate handbook policies, ensure proper exemption statuses, asses meal and rest period practices, and audit pay to ensure all employees receive payment at or above minimum wage ($15 per hour as of January 1, 2022).

Do You Have Questions About California’s AB 1003 Bill?

An experienced employment attorney at Ottinger Employment Lawyers can answer your AB 1003 inquiries.

If you are an employer, we can assist you in reviewing your current policies and practices and help ensure that your wage payment strategies meet the letter of the law.

If you are an employee and a victim of wage theft, we can help you fight to recoup your damages and support you down the path to restitution. Call or text us at 213-204-8003.

Author Photo

Robert Ottinger, Esq.

Robert Ottinger is an employment attorney who focuses on representing executives and employees in employment disputes. Before starting his firm, Robert slugged it out in courtrooms trying cases for the government. Robert served as a Deputy Attorney General for the California Department of Justice in Los Angeles and then as Assistant Attorney General for the New York Attorney General’s Office in Manhattan.

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