Ignorance of the Law Is No Excuse for Minimum Wage Violations, Says California Supreme Court

Ignorance of the Law Is No Excuse for Minimum Wage Violations, Says California Supreme Court

Recently, in Iloff v. LaPaille (2025) 573 P.3d 1100, the California Supreme Court decided two notable wage-and-hour law issues, including one regarding the “good faith” defense to liquidated damages for minimum wage violations.

Under California law, an employer that fails to pay minimum wages is presumptively liable for “liquidated damages in an amount equal to the wages unlawfully unpaid and interest thereon.” California Labor Code § 1194.2(a). The employer can avoid paying liquidated damages only by showing that it had a good-faith, reasonable belief that its conduct complied with the law: the “good faith” defense. See id. § 1194.2(b). In Iloff, the Supreme Court clarified the parameters of this defense, holding that the employer “must show that it made a reasonable attempt to determine the requirements of the law governing minimum wages; proof that the employer was ignorant of the law is insufficient.” 573 P.3d at 1102.

Laurance Iloff performed maintenance work on property owned by Bridgeville Properties, Inc. and managed by Cynthia LaPaille (together, “the employers”). The employers allowed Iloff to live rent-free in one of the houses on the property but did not provide him any other compensation for his services. After the employers terminated the agreement, Iloff filed wage claims with the California Labor Commissioner, including for failure to pay minimum wages. The Labor Commissioner rejected the employers’ argument that Iloff was an independent contractor rather than an employee, determining that Iloff was therefore entitled to unpaid wages, liquidated damages, and interest. The employers appealed the Labor Commissioner’s decision to the Superior Court, where Iloff reasserted the same wage claims, as well as a new claim for penalties under the California Paid Sick Leave law. Although the Superior Court agreed that Iloff was an employee, it ruled that he was not entitled to liquidated damages. The court held that the employers had successfully established the “good faith” defense, based on its finding that Iloff had agreed to perform his services in exchange for free rent and did not expect to be paid wages or treated as an employee. Additionally, the court rejected Iloff’s Paid Sick Leave claim, holding that Iloff could not raise this claim for the first time in the employers’ appeal. The Court of Appeal affirmed the Superior Court’s rulings on the liquidated damages and Paid Sick Leave law issues. The California Supreme Court granted review to address the two issues.

The “Good Faith” Defense Requires a Reasonable Attempt to Determine the Requirements of Minimum Wage Law.

Because the Court of Appeal denied liquidated damages based solely on the fact that Iloff had agreed to perform his services in exchange for free rent, and there was no evidence that the employers had affirmatively attempted to determine the requirements of minimum wage law, the question was whether the “good faith” defense requires an employer to show it made at least some attempt. The Supreme Court began by examining the language of the statute, noting that while the liquidated damages provision does not directly address the question, the preceding provision specifies that an employee who suffers a minimum wage violation is entitled to unpaid wages, interest, and attorney’s fees and costs “[n]otwithstanding any agreement to work for a lesser wage.” Lab. Code § 1194(a). The Court reasoned that “read in conjunction with the default rule mandating an award of liquidated damages whenever a minimum wage violation has been established, this language suggests that the Legislature intended for employers to be liable for liquidated damages even when their employees have agreed to work for less than the minimum wage.” 573 P.3d at 1105.

The Court next explored the legislative history of the liquidated damages provision. The Court observed that it was enacted as part of a bill that expanded the Labor Commissioner’s authority to prosecute minimum wage violations. Liquidated damages would be less effective as a means of enforcement and deterrence, the Court reasoned, “if an employer could evade them merely by showing that it was ignorant of the law.” Id.

Additionally, the Court cited evidence in the legislative history showing that the “good faith” provision was modeled on a similar provision in the federal Fair Labor Standards Act (“FLSA”). The Court noted that since before the enactment of California’s “good faith” provision, federal courts have interpreted the FLSA provision to require more than a showing of “[a]n employer’s ignorance of the Act or its requirements.” Id. at 1106. Since the enactment of the California provision, the Court went on, “federal courts have continued to interpret the FLSA good faith defense provision to require active steps to ascertain the dictates of the FLSA.” Id.

Addressing potential concerns that requiring a reasonable attempt to determine the requirements of minimum wage law places too great a burden on employers, the Court acknowledged that “what constitutes a reasonable effort will vary by context. An individual employing a person on a casual, irregular basis may not need to undertake the same kind of effort as an established business with regular employees.” Id. at 1108-09. The determination in this case was “straightforward,” however, “because the employers do not claim to have made any attempt to determine the requirements of the law governing compensation for Iloff’s services to their business.” Id. at 1109. The employers’ arguments–that Iloff had agreed to work in exchange for free rent, and that the law regarding employee vs. independent contractor status was more unsettled during the time of Iloff’s employment than it was at the time of trial–could be relevant to the “good faith” defense, but only after a showing that the employers had first made a reasonable attempt to determine the requirements of minimum wage law. After this preliminary showing, the Court explained, “a court may consider evidence of the nature of the parties’ relationship, their agreements with each other, and the legal landscape in determining whether the employer made a good faith effort to comply with those requirements.” Id. at 1108. Because the employers did not make this showing, the Court held that Iloff was entitled to liquidated damages. Id. at 1109.

An Employee May Raise a Paid Sick Leave Law Claim on Appeal of a Labor Commissioner’s Ruling.

The Paid Sick Leave law, Labor Code § 245 et seq., requires employers to provide their employees paid sick leave from work for health-related reasons or to care for sick family members. The question in lloff was whether, on appeal of a Labor Commissioner’s ruling (known as a “Berman” appeal), the employee can assert a Paid Sick Leave law claim that they did not raise before the Labor Commissioner. The Court of Appeal denied Iloff’s claim based on its interpretation of Labor Code section 248.5(a). This section lists the procedures by which a Paid Sick Leave law claim may be conducted, found in other provisions of the Labor Code: sections 98, 98.3, 98.7, 98.74, and 1197.1. However, section 248.5 does not reference section 98.2, the provision that allows a party to appeal a ruling of the Labor Commissioner and raise additional claims that the Labor Commissioner did not consider. The Court of Appeal “inferred from the absence of a specific citation to section 98.2 in section 248.5, subdivision (a), that the Paid Sick Leave law could not be enforced in the context of a Berman appeal.” 573 P.3d at 1110.

Once again, the Supreme Court began with the language of the statute, determining that “[a] careful reading of section 248.5, subdivision (a) in its statutory context reveals that [the Court of Appeal’s] inference was unfounded.” 573 P.3d at 1111. The Court noted that an introductory provision of the Paid Sick Leave law specifies that the law’s provisions are “in addition to and independent of any other rights, remedies, or procedures available under any other law.” Lab. Code § 245(b). Furthermore, the Court observed, “section 248.5 itself specifies that the procedures it provides are ‘cumulative.’” 573 P.3d at 1110 (quoting Lab. Code § 248.5(g)). The Court found that the absence of section 98.2 in section 248.5(a)’s list of enforcement mechanisms “makes sense when section 98.2 is compared to the provisions that do appear in the list.” 573 P.3d at 1110. The listed provisions all describe procedures for initiating an enforcement action. As the Court noted, section 98.2 “only provides for an appeal from an enforcement action that an employee initiates through a process described in a separate provision–section 98–which is listed in section 248.5, subdivision (a).” Id. at 1111. It was not necessary to include section 98.2 in this list, the Court reasoned, because section 98 already provides that authority.

The Court also looked to the legislative history of the Paid Sick Leave law, finding “no indication that the Legislature intended to preclude employees from raising Paid Sick Leave law claims in Berman appeals.” Id. Rather, the law was enacted “as a means of promoting the health, safety, and economic security of California workers, their families, and their communities.” Id. The specific language listing the various enforcement mechanisms “was added in 2020, as part of a bill that expanded leave entitlement in response to the COVID-19 pandemic.” Id. at 1111-12. The Court found “no indication that the Legislature’s intent in adding the list of statutory procedures was to restrict the use of procedures listed elsewhere in the Labor Code–such as those governing Berman appeals–to enforce the Paid Sick Leave law.” Id. at 1112.

The Supreme Court’s decision in Iloff strengthens the ability of California employees to vindicate their rights to receive minimum wages and paid sick leave. If you believe your employer has violated your workplace rights, contact Bryan Schwartz Law, P.C.