On September 27, 2021, Governor Newsom signed AB 1003 into law. AB 1003 adds “wage theft” to the Penal Code as a form of grand theft.
Penal Code section 487m shall now include the employer’s intentional theft of wages in an amount greater than $950 (from any one employee), or $2,350 (from two or more employees) in a 12-month period as grand theft. This new law will carry prison sentences of up to three (3) years and allows for the recovery of wages through a civil action.
“Wage theft” occurs when employers fail to pay their employees all wages that are owed. This occurs when an employer fails to pay an employee their full wages, whether in the form of salaries, commissions, gratuities, benefits, or other means of compensation. Examples where this can occur include paying less than minimum wage, failing to pay overtime, failing to provide compliant meal and rest breaks, and/or requiring an employee to work off the clock. Importantly, AB 1003 includes independent contractors as “employees” and the hiring entity of the independent contractor as the “employer”.
Previously, California Labor Code section 215 criminalized the intentional failure to pay wages as a misdemeanor. AB 1003 was passed after arguments that the consequences of violating Labor section 215 did not deter widespread wage theft.
AB 1003 targets payroll managers and supervisors, human resources personnel, and operations managers and supervisors who are tasked with managing payroll, overtime, and meal and rest break policies. It provides just one more reason why compliance with California wage and hour laws should be a priority for any company with California employees.
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