On September 27, 2021, California Governor Gavin Newsom signed Assemblywoman Lorena Gonzalez’s Assembly Bill 1003 into law.  This new legislation establishes that intentional theft of wages or tips by employers is punishable as grand theft.  The law takes effect on January 1, 2022.

According to the bill’s author, Assemblywoman Gonzalez (D-San Diego), AB 1003 will serve as a deterrent.  “For too long, corporations have gotten away with stealing from their employees and faced nothing more than a slap on the wrist,” she said.  “The system isn’t working if we can’t deter the most egregious actors from taking advantage of their own workers.  This law sends a clear message: if you intentionally steal workers’ hard-earned wages, you can actually go to prison.”

Existing law makes a violation of specified wage and gratuity provisions a misdemeanor, and provides for civil penalties and remedies for the recovery of wages.

Now, AB 1003 makes an employer’s intentional theft of wages or gratuities in an amount greater than $950 for one employee, or $2,350 for two or more employees, and in any 12 consecutive month period, punishable as grand theft.

Thus, AB 1003 increases the penalty and creates California Penal Code Section 487(m).  Prosecutors now have the authority to decide whether to charge an employer with a misdemeanor (imprisonment in a county jail for up to 1 year) or felony (imprisonment in county jail for 16 months or 2 or 3 years), by a specified fine, or by a fine and imprisonment.

AB 1003 provides the following:

• “Theft of wages” is the intentional deprivation of wages, as defined in Section 200 of the California Labor Code; gratuities, as defined in Section 350 of the California 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 its purposes, the bill specifies that “employee” includes independent contractors, and “employer” includes the hiring entity of an independent contractor.

• The bill specifically authorizes that wages, gratuities, benefits, or other compensation subject to the prosecution may be recovered as restitution.

• The bill does not prohibit the employee or the Labor Commissioner from commencing a civil action to seek remedies provided for under the Labor Code.

Employers of all sizes should be aware of this impactful new law and the large penalties it imposes for engaging in intentional wage theft – not paying workers what they are owed by law.

While it is currently unclear exactly how “intentional wage theft” will be defined or how strictly it will be construed, employers should carefully analyze their compensation policies and practices, and should consider offering employees additional trainings on such policies and practices if needed.  Employers should also be sure to evaluate the compensation policies of their independent contractors.  Lastly, employers should undertake any corrective measures necessary to ensure compliance with the law.