In Atempa v Pedrazzani the California Court of Appeal for the Fourth Appellate District recently held that individuals can be held personally liable for civil penalties under the California Labour Code.

Facts

Two restaurant employees filed a suit against their employer, Pama, Inc, and its owner, president, secretary and director, Paolo Pedrazzani, alleging wage and hour violations, including the failure to pay overtime and minimum wages. The employees sued on behalf of themselves and other alleged aggrieved employees pursuant to the Labour Code's Private Attorneys General Act 2004. They sought to recover civil penalties under Labour Code Sections 1197.1 and 558, which provide that an employer "or other person acting on behalf of an employer" who violates or causes a violation of those statutes "shall be subject to a civil penalty".

Decision

Following a bench trial, the trial court issued civil penalties against Pedrazzani individually as the "other person" who caused violations of the overtime and minimum wage statutes. The principal issue on appeal was whether, as a matter of law:

any individual other than the corporate employer can ever be found liable for civil penalties associated with statutory violations in the payment of wages . . . where . . . there is no allegation or finding that the corporate laws have been misused or abused for a wrongful or inequitable purpose (emphasis in original).

The Court of Appeal ruled that Pedrazzani could be personally liable for the civil penalties because Sections 558 and 1197.1 authorise the labour commissioner to recover the civil penalties, and the Private Attorneys General Act authorises plaintiffs to recover the Section 558(a) and 1197.1(a) civil penalties in place of the labour commissioner. The court explained that:

[i]n California, 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 (emphasis in original).

Neither of the statutes mentions the employer's business structure, the benefits or protections of the corporate form or any potential reason or basis for disregarding the corporate form. "To the contrary... the business structure of the employer is irrelevant"; if there is evidence and a finding that a party other than the employer violates the overtime and minimum wage laws, "then that party is liable for certain civil penalties regardless of the identity or business structure of the employer".

In addition, the court held that the common law alter ego doctrine is inapplicable because the statutes "on their face" make Pedrazzani personally responsible for the statutory violations that he committed or caused to be committed as an "other person".

Comment

The Court of Appeal's decision serves as an important reminder for employers that compliance with wage and hour laws should be a primary concern. Under the decision, employees can hold individual owners, officers and agents personally liable for penalties associated with wage and hour violations, in addition to attorneys' fees and costs, without piercing the corporate veil.

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