Last week, California’s legislature submitted a bill for the Governor’s approval, Assembly Bill 2074, which would amend Labor Code section 1194.2 dealing with the provision of liquidated damages arising out of an employer’s failure to pay minimum wage.

Employees who believe their employer did not pay them all of their wages may bring a civil lawsuit seeking several forms of damages, including liquidated damages for failing to pay minimum wage.  Liquidated damages under Labor Code section 1194.2(a) are comprised of “an amount equal to the wages unlawfully unpaid and interest thereon” (i.e., on top of the unpaid wages and penalties, employees may obtain another set of damages equivalent to the unpaid wages plus interest).

For employers, a crucial question when assessing potential damages in a civil lawsuit alleging claims for unpaid wages is how far back the employees’ claims stretch (i.e., the applicable statute of limitations).  California law provides a three-year statute of limitations for a claim for unpaid wages.  In contrast, while still unsettled, arguably a claim for penalties carries a one-year statute of limitations.  However, presently, there is no prescribed statute of limitations for a claim for liquidated damages under Labor Code section 1194.2.  Does such a claim follow the statute of limitations for unpaid wages or penalties?

Assembly Bill 2074 seeks to resolve any uncertainty regarding the applicable statute of limitations for liquidated damages claims.  As amended, Labor Code section 1194.2(a) would read, “A suit may be filed for liquidated damages at any time before the expiration of the statute of limitations on an action for wages from which the liquidated damages arise.”  AB 2074 (emphasis added).  In other words, if Governor Brown signs off on Assembly Bill 2074, the Labor Code will be amended to provide, clearly, that a claim for liquidated damages arising out of an employer’s failure to pay minimum wages carries a three-year statute of limitations.

Given the ongoing changes to California’s minimum wages, the first stage of which went into effect on July 1, 2014, employers should make sure they adjust employees’ wages accordingly.  Otherwise, Assembly Bill 2074 may allow employees to bring claims for liquidated damages as late as 2017 for minimum wage violations occurring right now.