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On Aug. 21, 2025, the California Supreme Court issued its decision in Iloff v. LaPaille (18 Cal. 551 (2025)), addressing the standard employers must meet in order to assert a good faith defense to liquidated damages in claims for unpaid minimum wages. The Court found that ignorance of the law cannot establish such a good faith defense.
Laurance Iloff lived and worked on property that Bridgeville Properties, Inc. owned and that Cynthia LaPaille managed. In exchange for his maintenance services, he was permitted to live rent-free in one of the properties the defendants owned and managed, but received no additional compensation for his work.
In response to his claim for liquidated damages for unpaid minimum wages, defendants argued that they had a good faith belief that Iloff was a contractor and not an employee who was due minimum wages. The Supreme Court rejected that defense, finding that an employer cannot establish a good-faith defense merely by asserting a mistaken belief about the nature of the relationship or assuming that no wages were owed. Ignorance of the law is not enough. To meet the standard under California Labor Code section 1194.2, the employer must show that it (i) made a reasonable attempt to determine what the minimum wage laws required and (ii) took steps to comply with those requirements.
The Iloff decision does not address whether its holding is intended to apply more broadly to good faith defenses in the context of other provisions of the California Labor Code. Thus, it remains unclear whether the standards articulated in Iloff will impact employers' ability to assert good faith defenses in connection with inaccurate wage statement claims under California Labor Code § 226 or final wages claims under California Labor Code § 203.
The Supreme Court's decision in Iloff may provide further motivation for employers to work with employment law counsel in California to ensure that they are properly educated on the state's legal landscape and steps employers may take to properly document their compliance efforts in order to be in the best position possible to support a good faith defense.
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