What Employees Need to Know about California’s New Wage Theft Law
Workers in California are cheated out of an estimated $2 billion in stolen wages every year. Although California has some of the strongest employee protection laws in the nation, wage theft is unfortunately still pervasive in the state.
Especially among low-wage and hourly workers. Many employees don’t even realize that their employers are stealing from them. And those who do are often afraid to take action for fear of employer retaliation.
In 2021, California employees sought only $320 million in civil restitution for unpaid wages — a fraction of the estimated $2 billion stolen by employers every year.
To combat this epidemic, the state recently adopted a law that takes an aggressive new approach to cracking down on employers who intentionally withhold compensation from their workers.
In this blog post, we’ll explain what wage theft is, break down how California’s new law takes a strong stance against it, and outline how workers in California can take action to get compensation for lost wages.
What Does Wage Theft Look Like In California?
In California, wage theft is a serious offense. As per Assembly Bill 1003 passed in 2021, instances of wage theft exceeding $950 are prosecuted as grand theft. Victims can report such cases to law enforcement authorities.
Wage theft happens any time an employer fails to give an employee the compensation that they’re legally owed for their work. Wage theft can happen in a variety of different ways, and it doesn’t necessarily have to involve just your wages.
Withholding any earned benefits or gratuities, like meal breaks or sick leave, also constitutes wage theft under California law.
Here are some more examples of what wage theft can look like, according to the California Labor Commissioner’s office:
- Paying an employee less than minimum wage per hour
- Employment owners or managers taking an employee’s tips
- Refusing an employee meal breaks or rest breaks
- Failing to pay employees agreed-upon wages (including overtime on commissions and regular wages)
- Taking unauthorized deductions from an employee’s paycheck
- Failing to pay an employee’s final wages promptly
- Withholding promised benefits, including sick leave and vacation
- Refusing to reimburse employees for business expenses
In 2011, California passed the Wage Theft Prevention Act, which aimed to raise awareness about the extent of wage theft in the state and put the onus on employers to inform workers about their rights to fair pay.
Under this law, all private employers have the duty to inform their employees about certain basic but critical information about their compensation and benefits. This includes:
- The employee’s rate or rates of pay,
- The employee’s designated payday,
- The employer’s intent to claim allowances (meal or lodging allowances) as part of the minimum wage, and
- The basis of wage payment (whether paying by the hour, shift, day, week, piece, etc.), including any applicable overtime rates
Employers have to provide this information to workers in writing (in their preferred language) when they’re hired. They’re also required to disclose any and all alternate names the company might use as part of their business.
For example, if a landscaper is incorporated under the owner’s name, but uses different “trade names” for its locations in different cities. If there are any changes to the pay or benefits policy, it’s the employer’s responsibility to provide workers with updated information, if it’s not included in their pay stubs.
The 2011 law only applies to employers in the private sector, though. Employees who are considered “exempt” (i.e. don’t receive overtime pay) or who are covered by collective bargaining agreements are also not required to receive pay notice from their employers under the law.
What Is Ab 1003 And How Does It Change Wage Theft Law In California?
In 2022, a new law went into effect in California that raises the stakes on the battle to prevent the rampant spread of wage theft in the state.
Under this law, known as AB 1003, certain incidents of wage theft can now be treated as “grand theft” — a serious offense that poses business owners, managers, and executives with much more serious consequences for stolen wages than before.
According to the bill, employers commit grand theft of wages when they intentionally withhold compensation (including wages and 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.”
The 2022 law applies to all employers in California, regardless of size. Importantly, it also applies to independent contractors as well as direct employees.
This is a significant piece of legislation that employers can’t afford to ignore without consequences. Grand theft is considered a felony offense under California law. Prior to 2022, all wage and hour violations were treated as misdemeanor crimes.
This meant that if an employee made a complaint or brought civil charges for their stolen wages, companies would be compelled to pay recovery and face fines, but often not much else.
Now that employers can be subject to felony prosecution, violating wage laws can mean potential jail time — up to a three-year prison sentence — in addition to severe fines.
Access to felony charges also gives California prosecutors more resources to work with during wage theft investigations, such as search warrants and the use of grand juries. This could encourage California prosecutors to investigate wage theft cases as criminal offenses and take legal action against employers.
How severe this legal action ends up being will play out on a case-by-case basis. It will also likely hinge on one critical element of the new law: whether or not the wage theft was “intentional.”
Proving that an employer was purposefully stealing wages is a bit more complicated than it may seem. Wage violations can stem from miscommunication between employers and workers over policies like break times or payroll scheduling.
An employer could even miss an overtime payment due to simple oversight, not out of the intent to deprive a worker their compensation. Demonstrating intentional wage theft in court will require more specific evidence. For example, proof of an employer’s refusal to pay a previously agreed-upon hourly rate of pay.
Since AB 1003 doesn’t provide an exact definition of what “intentional” wage theft looks like, interpretations will be determined by the circumstances of each case.
What Should I Do If My Employer Is Withholding My Wages Or Benefits?
The good news for workers is that you can get restitution for unpaid wages even if your employer isn’t ultimately charged with a crime.
Employees who are concerned about missing pay or benefits can take action by filing a wage claim with the California Division of Labor Standards Enforcement (DLSE). This can be done online, by mail, or in person. The DLSE will ask for copies of documents that support your claim and can illustrate how much you’re owed.
Some of the documents you may need to have could include time sheets, paychecks/stubs, records of unpaid commissions, or notices from the employer regarding your employment information (rate of pay, overtime rate, whether you’re paid by the hour, shift, day, piece, etc.).
Workers with verified wage claims can win recovery in the form of back pay for missing compensation. In some cases, your employer may also be assigned legal penalties for their violation of your rights.
However, workers do have a limited amount of time to file an administrative claim with the DLSE in California. Deadlines for wage claims vary depending on the type of violation:
- Bounded paycheck or withheld payroll/personnel records: one year to file.
- Breach of oral promise to pay wages higher than minimum wage: two years to file.
- Violations of minimum wage, overtime, unpaid rest and meal breaks, sick leave, illegal deductions from pay, or unpaid reimbursements: three years to file.
- Breach of written employment contract: four years to file.
Beyond filing a wage claim, employees can also sue their employer in civil court for any stolen wages or benefits.
Get in Touch with an Employment Lawyer in California Today
It can be intimidating to take action to hold your employer accountable for wage theft and get the compensation you’re owed.
But you don’t have to do it alone. An employment attorney familiar with California labor law can evaluate your circumstances, answer your questions, and make sure you have what you need to get the recovery you deserve.
Ottinger Employment Lawyers have been helping employees in California navigate wage claims for over 20 years. If you think your employer is stealing from you, don’t wait — reach out to Ottinger’s team of experienced attorneys today to discuss the details of your case.