Are Individual Defendants, or Simply the Employer Entity, Liale for Wages and Penalties Arising from Labor Code Violations?
Three individual defendants owned three garment manufacturing companies that experienced financial difficulties, leaving them unable to meet payrolls. During this period of time, the individual owners told employees to continue working until their company, Win Corporations, could meet payroll. When employees complained of unpaid wages, the Dept. of Labor filed suit, closed Wins Corporations, and seized its assets. The California Labor Commission then sought to hold the individual defendants personally liable for unpaid wages owed the employees.
The Trial Court ruled in favor of Wins Corporations. The California Appeals Court affirmed, holding that while the Industrial Welfare Commission Wage Order relevant to the garment industry defines “employer” as the one who “exercises control” over employees’ wages, hours or working conditions, Reynolds v. Brement precluded application of the definition to Wins Corporations alleged Labor Code Violations because its failure to pay the employees wages must be interpreted under the common law definition of “employer.” Under the common law definition of employer, defendants were not personally liable for the wages and penalties since defendants did not require that the employees work for them personally or take their money directly.
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