SB 688: California Employers Will Be Held Accountable for Failure to Pay “Contract Wages”

An employer’s failure to pay wages in accordance with an employment contract – even if what’s paid is in excess of the minimum wage – can now be penalized with fines and restitution orders by the California Labor Commissioner. wage and hour lawyer

That’s thanks to SB 688, a newly-passed measure that amends California Labor Code Ch. 723 s. 1197.1, which goes into effect next month.

“Contract wages,” as explained in the bill/statute, are wages based upon an agreement between a company and a worker for regular, non-overtime hours that is in excess of the applicable minimum wage.

Los Angeles labor law attorneys can explain that under existing law, employers (or those acting as officers/agents) who fail to pay a worker less than minimum wage can be subject to citation and penalties from the Labor Commissioner. However, that power of enforcement does not extend when workers are paid in excess of minimum wage – yet should be paid more according to their employment contract.

The current minimum wage in California is $12 hourly for companies with more than 25 workers and $11 hourly for employers with fewer. It will increase as of Jan. 1, 2020 to $13 and $12, respectively. Many local minimum wages are also set higher by ordinance because of higher costs of living in those areas. Many of those minimum wages are set to rise too. Minimum wages will rise again another $1 on Jan. 1, 2021.

In order to exempt workers from minimum wage requirements, they must generally earn a minimum monthly salary of $54,080/year ($4,500 monthly) if the company has 26 or more employees, or $49,920/year ($4,160 monthly).

Details of SB 688

If a worker and an employer agree to a set rate for wages above the state minimum and the employer violates that agreement, the main recourse would be to file a breach of contract lawsuit. These can be expensive, and not all law firms will take them on a contingency fee basis (i.e., “we don’t get paid unless you win”). Depending on the amount an employee was allegedly shorted, it may not be worth the time and expense to pursue this avenue.

SB 688 aims not to let those employers off-the-hook, especially when they underpaid numerous employees in the same manner. It provides another avenue of accountability via the Labor Commissioner. with the change in the law, if the Commissioner finds an employer in violation of a contract wage agreement in excess of minimum wage, the agency can issue a citation and recover restitution in the amounts owed.

For a first-time, intentional violation, the penalty is $100 for each underpaid worker for every pay period that it occurs. Second violations will be penalized with a $250 fine per worker, regardless of whether the violation was intentional.

Further, existing law requires employers filing a writ of mandate with the court to contest Labor Commissioner civil penalties must post an undertaking (written promise of monetary payment as security for performance of particular act in a legal action). As it stands, some or all of that is forwarded to the worker in the event the employer doesn’t pay the court’s judgment on wage and hour violations and damages. Changes to the law will instead have that undertaking sent to the Labor Commissioner “for appropriate distribution.”

Contact the employment attorneys at Nassiri Law Group, practicing in Orange County, Riverside and Los Angeles. Call 714-937-2020.

Additional Resources:

SB 688, Failure to Pay Wages: Penalties, Oct. 10, 2019

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