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Business Owners and Managers Face Personal Liability for PAGA Penalties for Labor Code Violations

SUMMARY:  Restaurant employees sued their former employer and its individual owner for wage and hour violations under the Private Attorneys General Act (“PAGA”).  The trial Court ruled in favor of the Plaintiffs and awarded over $340,000 in personal liability against the owner, in his individual capacity (of that amount, $315,014 was attributable to the Plaintiffs’ legal fees in the lawsuit) under California Labor Code section 558.1.

RULE:  The Appellate Court upheld the PAGA award against the individual restaurant owner relying on the language of Labor Code sections 558 and 1197.1, which state both the employer and any “other person” who causes a wage and hour violation are subject to civil penalties.  The Court concluded the individual owner who also acted as the company’s president, secretary, and director qualified as an “other person” within the meaning of the Labor Code.  However, other courts have clarified that if an employee sues an owner, operator, director or managing agent in an individual capacity, but that person did not “cause” the alleged Labor Code violations, the Court may grant summary judgment and dismiss the individual from the lawsuit.


TAKEAWAYS:  Owners, officers, directors, managers and supervisors of companies with employees in California should learn the nuances of wage and hour compliance to avoid personal liability. Businesses may also choose to train their management employees in wage and hour basics. 


Atempa v. Pedrazzani
Please contact Allison Wallin for more information.