Wage Theft - Penal Code 487m PC
In California, willful failure to pay employees their rightful wages is more than just a violation of employment law—it's a crime. Wage theft is criminalized under Penal Code 487m PC.
This law protects employees from unscrupulous employers who fail to pay lawful wages. Recent legislation now enables the state government to prosecute instances of wage theft as grand theft if the underpaid wages exceed $950.
California has long considered intentional employer failure to pay wages and tips a misdemeanor, with civil penalties and remedies for recovery. As of January 2022, prosecutors could file felony charges under PC 487m for violations under certain conditions.
PC 487m says, “(a) Notwithstanding Sections 215 and 216 of the Labor Code, the intentional theft of wages in an amount greater than $950 from any one employee, or $2,350 in the aggregate from two or more employees, by an employer in any consecutive 12-month period may be punished as grand theft.
(b) For purposes of this section, "theft of wages" is the intentional deprivation of wages, as defined in Section 200 of the Labor Code, gratuities, as defined in Section 350 of the Labor Code, benefits, or other compensation, by unlawful means, with the knowledge that the wages, gratuities, benefits, or further compensation is due to the employee under the law.
(c) For purposes of this section, "employee" includes an independent contractor, and "employer" consists of the hiring entity of an independent contractor.
(d) Wages, gratuities, benefits, or other compensation that are the subject of a prosecution under this section may be recovered as restitution by Sections 1202.4 and 1203.1. This section does not prohibit the employee or the Labor Commissioner from commencing a civil action to seek remedies provided under the Labor Code for acts prosecuted under this section.
(e) This section does not constitute a change in and does not expand or limit the scope of conduct prohibited by Section 487.”
If you are charged with wage theft and are convicted, you could face up to 3 years in prison, fines of up to $10,000, and required restitution to the employee in question for missing wages.
What is Wage Theft?
Wage theft refers to a wide range of acts where an employer fails to pay their employees the rightful wages they have earned. Penal Code 487m specifically defines “theft of wages” as the “intentional deprivation of wages, as defined in Section 200 of the Labor Code, gratuities, as defined in Section 350 of the Labor Code, benefits, or other compensation, by unlawful means, with the knowledge that the wages, gratuities, benefits, or other compensation is due to the employee under the law.”
For purposes of this law, independent contractors also count as employees. Wage theft can occur in a variety of ways, including but not limited to:
- Underpayment: Paying employees less than the minimum wage.
- Overtime Violations: Failing to pay for overtime hours or not paying the correct overtime rate.
- Misclassification: Misclassifying employees as independent contractors to avoid paying benefits and overtime.
- Illegal Deductions: Making unauthorized deductions from an employee's paycheck.
- Meal and Rest Break Violations: Not providing or compensating for legally required meal and rest breaks.
- Off-the-Clock Work: Requiring employees to work off the clock without pay.
- Pay Stub Violations: Failing to provide accurate and itemized wage statements with each paycheck.
- Final Paycheck Violations: Withholding final paychecks or not paying final wages promptly.
- Tipped Employee Violations: Taking tips from tipped employees or failing to make up the difference when tips and the employer's direct wages do not meet the minimum wage.
What Factors Must Be Proven?
To secure a conviction for wage theft under Penal Code 487m, the prosecution must prove certain elements beyond a reasonable doubt. These include:
- Intentional denial of wages: The prosecutor must show that the employer intentionally failed to pay the employee their due wages. This could be through direct denial or oblique measures like misclassification.
- False representation of wages: If an employer has misrepresented the amount owed to an employee, this too can be considered wage theft. For example, if an employer tells an employee they will be paid $15 per hour but then pays them only $10 per hour, this is a false representation of wages.
- Earned wages: The prosecutor must also demonstrate that the employee earned the wages. This typically involves showing that the employee performed work for which they were entitled to compensation.
- Failure to pay: Lastly, the prosecution must prove that the employer did not pay the employee the wages they earned.
Prosecution of Wage Theft as Grand Theft
In 2021, the passage of Assembly Bill 1003 amended California law so that wage theft exceeding $950 in value is now prosecuted as grand theft, which may be charged as a felony.
This is a significant point given that felonies carry more severe consequences than misdemeanors, including higher fines and longer prison sentences. Specifically, wage theft can be prosecuted as grand theft if the employer does one of the following:
- Withholds more than $950 from an employee over 12 months; or
- Withholds over $2350 from two or more employees over 12 months.
What Are the Penalties for Wage Theft?
The penalties for wage theft in California can be severe. If the theft exceeds $950, it is usually treated as petty theft, a misdemeanor. Penalties may include fines up to $1,000 and imprisonment in the county jail for up to one year.
However, if the value of the unpaid wages exceeds $950, the offense is treated as grand theft, a “wobbler” offense, and may be charged as a misdemeanor or a felony. If you're convicted of felony wage theft, you could face:
- 16 months, two years, or three years in state prison; and
- Fines of up to $10,000.
Additionally, for any conviction of wage theft (felony or misdemeanor), you will be required to make restitution to the employee for wages withheld.
What Are the Common Defenses?
A California criminal defense attorney may implement several possible defenses if you're charged with a wage theft violation. These include, but are not limited to:
- No Willful Intent: Convictions under PC 487m must show intent to withhold payment. You may be absolved of the charges if you can show that the withheld payment was due to oversight.
- Employee Did Not Earn Wages: If you can show that payment was withheld because the employee in question did not work the hours claimed, complete the contracted work, etc., you may be able to get the charges dismissed.
Contact our law firm for a case review. Eisner Gorin LLP is based in Los Angeles, CA.