July 15, 2022 Executives May Be Held Personally Liable For Wage Violations

This week, a California Court of Appeal issued its decision in Seviour-Iloff v. LaPaille, and ruled that a California CEO may be personally liable for wage/hour violations.  This case is another reminder of the care that California employers must take with employee pay practices. 

Background of Seviour-Iloff v. LaPaille

LaPaille was Chief Executive Officer and Chief Financial Officer of BPI, which owns and operates several properties in Humboldt County, California. In exchange for free rent, a husband and wife (the Iloffs) performed various tasks for BPI, such as serving rent notices, and maintaining BPI’s properties.  BPI, however, did not pay actual wages to the Iloffs for any tasks or maintenance they performed for BPI.  The Iloffs filed wage claims with the California Department of Labor Standards Enforcement (“DLSE” – sometimes also called the Labor Commissioner) against LaPaille and BPI seeking unpaid wages in the amount of $132,880.

The Labor Commissioner concluded that the Iloffs were entitled to recover regular and overtime wages, liquidated damages, interest, waiting time penalties, and additionally held that LaPaille was personally liable for those amounts.

LaPaille and BPI appealed the Labor Commissioner’s order to the Superior Court.  Although the court  found that the Iloffs were entitled to unpaid wages and interest on those amounts, it ruled that LaPaille was not personally liable for these amounts. 

The Court of Appeal disagreed, and concluded that the trial court erred in declining to impose personal liability on LaPaille because the California Labor Code provides that any “person acting on behalf of an employer, who violates, or caused to be violated, any provision regulating minimum wages . . . may be held liable as the employer for such violation.”

What This Means

California Labor Code section 558.1(b) permits liability for wage violations to rest upon “a natural person who is an owner, director, officer, or managing agent of the employer.”  This provision, as demonstrated by the Seviour-Iloff case, may result in individual owners and executives being personally liable for California wage/hour violations.  If nothing else, this court opinion is a reminder of the importance of careful attendance to company pay practices.


AUTHORS

Joe Connaughton
Jessika Russell (USD School of Law, Class of 2023)