Los Angeles, Calif. (February 18, 2020) - In October 2019, Governor Gavin Newsom signed Assembly Bill 673 (AB 673) into law, broadening the scope of California Labor Code (Labor Code) section 210 to permit recovery of statutory penalties for late wage payments by affected employees.

Prior to AB 673, the Labor Code only permitted recovery of civil penalties by the Labor Commissioner and required that a specified percentage of recovered penalties be paid into a fund dedicated to educating employers about state labor laws, while the remainder was to be paid into the State Treasury to the credit of the General Fund. The Labor Commissioner could seek civil penalties as part of administrative proceedings to recover unpaid wages and penalties, or by filing suit in an independent civil action. Meanwhile, employees who received late wage payments could only seek civil penalties by way of the Private Attorneys General Act (PAGA) and even then, could personally recover only 25% of recovered penalties.

With the passing of AB 673, beginning this year, employees—including those licensed under the Barbering and Cosmetology Act—may recover statutory penalties under section 98 of the Labor Code on an individual basis, through a private right of action. Additionally, the Labor Commissioner no longer has the authority to recover civil penalties in an independent civil action.

For initial violations, AB 673 imposes a $100 penalty. For subsequent, willful, or intentional violations, the new law imposes a penalty of $200 plus 25% of the unlawfully withheld amount. Thus, two late payments of wages totaling $2,000 will result in a penalty of $800 ($100 for the first violation plus $200 for the subsequent violation + $500 [$2,000 x .25]). Under AB 673, these penalties are paid to the affected employee only; the affected employee need not “share” with the state.

Notably, AB 673 provides that “[a]n employee is only entitled to either recover the statutory penalty provided for in this section or to enforce a civil penalty as set forth in subdivision (a) of Section 2699, but not both, for the same violation.” Accordingly, an employee must choose whether to recover in a private right of action or through a PAGA action.

In light of AB 673’s creation of a private right of action that empowers (and arguably invites) employees to personally recover statutory penalties, employers in California should be mindful about their payroll practices and aim to avoid late wage payments.

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