254 | 2024 Cal-Peculiarities ©2024 Seyfarth Shaw LLP www.seyfarth.com employees under PAGA, against “any person acting on behalf of an employer who violates, or causes to be violated,” a statute or Wage Order regarding wages.467 The Court of Appeal has held that a company’s president, sole shareholder, and director could be individually liable, both as a joint employer and as an alter ego. At issue was a suit by restaurant employees against their former employer, Koji’s, for unpaid wages, inadequate wage statements, and failure to provide meal and rest breaks. Koji’s went out of business, but the employees also sued Arthur Parent, Koji’s president, sole shareholder, and director. The trial court, after a bench trial, rejected the plaintiffs’ contention that Parent was a joint employer. The trial court was concerned that if Parent were held liable because of his control as sole shareholder and president of Koji’s, then all owners of closely held corporations would suffer the same fate. But the Court of Appeal reversed, holding that Parent could be individually liable as a joint employer because he was the “big boss” who hired and fired managers and laid off the employees.468 The Court of Appeal also held that personal liability could be possible on an “alter ego” theory, emphasizing that the theory applies not only when a sham corporate entity is formed to commit a misdeed, but also when the corporate form is used to circumvent a statute or to accomplish some other wrongful purpose.469 Penalties. The “A Fair Day’s Pay Act” added Labor Code section 558.1 to enhance the Labor Commissioner’s enforcement authority to recover civil penalties.470 Under section 558.1, any employer or any “other person acting on behalf of an employer” may be held liable for violations of the directives appearing in the Wage Orders and in various provisions of the Labor Code. The Legislature defines “other person acting on behalf of an employer” as “a natural person who is an owner, director, officer, or managing agent of the employer.”471 The “managing agent” definition mirrors the definition found in California’s punitive damages statute. Under that statute and case law, “managing agents” are all employees who exercise substantial independent authority and judgment in their corporate decision-making such that their decisions ultimately determine corporate policy. The Courts of Appeal have been a bit inconsistent in applying the Act. In one case, restaurant employees seeking unpaid wages sued their corporate employer and also Paolo Pedrazzani—the corporation’s owner, president, secretary, and director. The employees invoked PAGA to seek civil penalties under Labor Code sections 558 and 1197.1, which authorize recovery of civil penalties against the employer “or other person acting on behalf of an employer” who violates or causes a violation of those statutes. After a bench trial, the trial court issued civil penalties against Pedrazzani individually as an “other person” who caused violations of the overtime and minimum wage statutes. The Court of Appeal affirmed, reasoning that Pedrazzani could be personally liable for civil penalties—even in the absence of a viable “alter ego” theory—because sections 558 and 1197.1 authorize the Labor Commissioner to recover civil penalties, and because PAGA authorized plaintiffs to recover those penalties in the Labor Commissioner’s place: “California … has decided that both the employer and any ‘other person’ who causes a violation of the overtime pay or minimum wage laws are subject to specified civil penalties.” The Court of Appeal concluded that if a party other than the employer committed or caused to be committed violations of the overtime and minimum wage laws, then that party is personally liable for “certain civil penalties regardless of the identity or business structure of the employer.”472 In another case, a former truck driver sought penalties from his former employer and the employer’s owner for meal and rest period violations. The Court of Appeal found the employer’s owner personally liable under section 558.1, even though the owner was not personally involved in the actions that led to the violations. The Court of Appeal concluded that to be personally liable, the individual does not necessarily need to have been involved in “the day-to-day operations of the company” or have “authored the challenged employment policies or specifically approved their implementation.” To be personally liable, the Court found that the owner “must have had some
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