California Employers: Review Your Wage and Hour Policies for State Compliance

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With the new year around the corner, we will continue to ensure that you are up to date on California employment laws that become effective in 2022. This update will focus on California wage and hour law, where non-compliance can result in criminal charges and potential imprisonment. While well-meaning employers are likely not the target of this revision, it serves as an important reminder for employers to check their wage and hour compliance.

Assembly Bill 1003 – Intentional Wage Theft

What is wage theft?

Wage theft occurs when an employer fails to pay an employee their full wages, whether it’s salaries, commission, gratuities, benefits, or other forms of compensation.

Existing law makes a violation of specified wage and gratuity provisions a misdemeanor and provides for civil penalties and remedies for the recovery of wages.

What is the impact of AB 1003?

Under AB 1003, the definition of “grand theft” under the California Penal Code is amended to include intentional wage theft, punishable as either a misdemeanor or felony. As of January 1, 2022, an employer’s intentional theft of wages or gratuities in an amount greater than $950 for one employee, or $2,350 for two or more employees, and in any 12 consecutive month period, is punishable as grand theft. Under this bill, independent contractors are treated as employees.

At this time, we do not know how strictly “intentional” will be construed. However, it is unlikely that inadvertent mistakes would be cause for concern and subject an employer to go to jail. Nonetheless, well-meaning employers should ensure that they are following the best practices related to California compensation policies and procedures.

What can Employers do to ensure they are following the best compensation practices?

  • Consider offering managers and supervisors additional/refresher training related to compensation policies and procedures;
  • Mandating nonexempt employees to check and verify by signature that their time entries are accurate before submitting them to payroll;
  • Evaluating independent contractor agreements and/or invoices to verify all compensation is being paid;
  • Properly outlining what constitutes a nondiscretionary bonus versus a discretionary bonus;
  • Employers should audit their Handbook and verify their policies are compliant.

For more information, please contact us at info@mnklawyers.com.

This material is provided for informational purposes only. It is not intended to constitute legal advice, nor does it create a client-lawyer relationship between MNK Law and any recipient. Recipients should consult with counsel before taking any actions based on the information contained within this material.

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