The question whether an individual may be held liable for alleged wage-hour violations is one that occasionally arises in class action litigation – and, for obvious reasons, it is one that is particularly important to individuals who own entities or who are responsible for overseeing wage-hour compliance.
In Atempa v. Pedrazzani, the California Court of Appeal held that persons responsible for overtime and/or minimum wage violations in fact can be held personally liable for civil penalties, regardless of whether they were the employer or the employer is a limited liability entity. And the Court concluded that private plaintiffs may pursue and collect these penalties for "aggrieved employees" on behalf of the state of California through the Private Attorneys' General Act ("PAGA").
Defendant Paolo Pedrazzani was the owner, president, director, and secretary of Pama, Inc.. Two former employees filed a variety of wage-hour claims against Pedrazzani and Pama in July 2013, including claims for civil penalties on the basis of unpaid minimum wages (Cal. Lab. Code 1197.1) and unpaid overtime (Cal. Lab. Code 558). Following a judgment in favor of the employees that Pedrazzani and Pama were jointly and severally liable for the civil penalties, Pedrazzani appealed and Pama filed for bankruptcy.
The Court of Appeal held that Pedrazzani was personally liable for the civil penalties because "the Legislature has decided that both the employer and any 'other person' who causes a violation of the overtime pay or minimum wage laws are subject to specified civil penalties." (italics original). And because neither statute mentions corporate structure, corporate form, or suggests that the same has any bearing on liability, it concluded that "the business structure of the employer is irrelevant."
The Court also held that personal liability can attach even if a person has no formal relationship with the corporate employer (e.g., employee, manager, officer). Rather, for overtime violations, it is sufficient that that the "other person" was "acting on behalf of the employer"; and for minimum wage violations, it is sufficient that the "other person" "pays or causes to be paid less than the prescribed minimum wage." Summarizing, the Court held that the statutes at issue "provide for an award of civil penalties against the person who committed the underlying statutory violations."
After establishing the basis for Pedrazzani's personal liability, the Court went onto explain that the former employees had standing to seek and collect the penalties under PAGA, and that such penalties are subject to the standard division between the aggrieved employees and the State (25% to the former; 75% to the latter).
Unfortunately, the Court did not address the standard or evidentiary showing needed to establish that someone is an "other person" who can be held personally liable for the civil penalties.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.