Articles Posted in Wage Violations

Under the Private Attorney General Act (PAGA), California employees are in effect deputized to be roving labor code cops and enforce the law themselves. This law was passed in 2003 because the government did not have the resources to effectively enforce the labor code, so it gave all employees the ability to act as government agents. In most cases, money recovered under PAGA by employees is split 75/25 with the government. It is a great concept but certain questions have been unsettled. On February 27, 2012, the California Court of Appeals in Thurman v. Bayshore Transportation resolved several open questions.

Thurman was brought on behalf of bus drivers who were not paid for meal and rest breaks. One of the issues was wether the drivers were entitled to recover their unpaid wages under California Labor Code Section 558. Section 558 imposes a penalty on any employer, or other person acting on behalf of an employer, who violates any law that regulates the hours and days of work. The penalty consists of $50 for the first violation and $100 for each subsequent violation as well as an amount equal to any unpaid wages owed to the employee. Also, wages recovered under Section 558 are to be paid directly to the employee – meaning that the employee gets to keep their wages and is not required to share that part of the recovery with the government under the 75/25 split.

In Thurman, the defendants argued that unpaid wages cannot be recovered under Section 558. Not only did this argument fly in the face of the plain language of Section 558, but the California Supreme Court had already made it clear that wages were recoverable under Section 558 as a penalty in Reynolds v. Bement (2005) 36 Cal.4th 1075. In Reynolds, the Court held that “pursuant to section 558, subdivision (a), any ‘person acting on behalf of an employer who violates, or causes to be violated’ a statute or wage order relating to working hours is subject to a civil penalty, payable to the affected employee, equal to the amount of any underpaid wages.” The Thurman court found that unpaid wages are just part of the penalty included in Section 558 and they are recoverable.

The Ohio Employer’s Law Blog by Jon Hyman focused on a recent Department of Labor Press Release announcing a crackdown on Los Angeles restaurants for wage violations. The press release states that over “the past six years, the division’s Los Angeles office found that 72 percent of all restaurants investigated in its jurisdiction were in violation of the FLSA.” This statistic does not include the restaurants not investigated so the percentage of restaurants in violation is probably much higher.

Jon Hyman of the Ohio blog cited above believes that the high rate of wage violations can be attributed to the complexity of the wage laws. He states the “FLSA and its regulations are that complex, twisted, and anachronistic.” I agree that these laws are confusing, but I doubt many restaurant owners and managers ever look at the Fair Labor Standards Act. Also, even though the text of the FLSA is unclear, everyone knows the basics – pay employees the minimum wage and overtime. Pretty simple concepts. In my view, the unclear laws are part of the problem but not the real problem.

Restaurants and many other businesses violate the wage laws for another reason – because they think they can get away with it and most of them do. Violating wage laws makes good business sense. If they get away with it, companies save a fortune in unpaid wages. If caught, the penalty usually is just paying the employee what was owed anyway and often less. In most cases, the end result for employers is a nice interest free loan from the employees.

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