How One California Case Proves Having Asset Protection and Mitigation Structures in Place Can Prepare and Secure Your Business
Dear Clients, Colleagues and Friends,
Spencer owns a small business with approximately 100 employees. Spencer and his company are exposed, daily, to numerous sources of potential liability since every aspect of running the business is full of risks – from investing in new products and providing services to customers, to hiring and firing employees. Unfortunately, even though Spencer tries his best to ensure that the company complies with applicable laws, Spencer is not always up to date on such matters given the ever-changing landscape of California’s wage and hour laws.
Spencer knows that California employers are required to provide daily meal and rest breaks to most unsalaried employees – and that whenever a break is required to be taken by law, but is taken late or missed for any reason, Spencer must pay the employee an additional hour of pay at the employee’s regular rate of compensation (known as “premium payments”).[1] However, Spencer has not been reporting these premium payments on his employees’ paystubs as “wages” because as far as he is aware of, this is not required by law.
Unbeknownst to Spencer, the California Supreme Court just ruled that premium payments are now considered to be “wages” that must be accurately reported on an employee’s wage statements[2] and paid within statutory deadlines when an employee leaves their job.[3] Under the court decision, any “knowing and intentional” violations for failure to properly report such premium payments as wages on an employee’s wage statements can trigger penalties of up to USD $4,000.00 per employee.[4] Moreover, if employers fail to compensate employees for missed-break premium payments and do not rectify this by the time of the employee’s final paycheck, the employer may be liable for waiting-time penalties of up to 30 days’ worth of pay.[5]
Solicited by a law firm’s direct mail notice, Gus, a former employee, joined a class-action lawsuit claiming that he and other former employees were denied compliant meal and rest periods and that Spencer’s company failed to compensate them for the missed-break premium payments. They are also alleging that because the premium payments were not paid to them upon their departure, they are all owed waiting time penalties.
While Spencer believes that the company properly compensated plaintiffs for all missed-break premium payments, his chances of successfully defending the case are dubious. Spencer’s employment defense lawyer informs him: the company (1) had not been reporting missed-break premium payments on his employees’ wage statements, and (2) does not have a verification system in place to confirm that compliant meal and rest periods were actually provided even if employee time records do not reflect that such breaks were taken. It will be extremely difficult to prove that the company did in fact compensate plaintiffs for all missed-break premium payments. Moreover, to make matters worse, Spencer himself may be subject to personal liability – since California’s labor laws can create personal liability for business owners who violate or cause state wage and hour laws to be violated.[6]
In hindsight, Spencer regrets not implementing risk mitigation structures for himself and on behalf of his company which were previously recommended by his attorneys, as he would be in a much better position to negotiate a more favorable lawsuit settlement. This is because litigation is very expensive, and plaintiffs are not likely to pursue a lawsuit if there is doubt as to their ability to collect on a judgment.
While there is no single line of defense guaranteed to fully protect all your assets, multiple layers of carefully integrated business and estate planning with asset protection can help keep your estate protected from those pesky lawsuit creditors and predators.
If you are interested in protecting your hard-earned legacy, contact us to learn more about how we can help you customize an asset protection plan which will provide you with great peace of mind and a nest egg of protection in case the unexpected happens.
Jeffrey M. Verdon, Esq.
- [1] Cal. Lab. Code § 226.7(c).
- [2] Cal. Lab. Code § 226.
- [3] See Naranjo v. Spectrum Security Services, Inc., (2022) 2022 Cal. LEXIS 2878.
- [4] Cal. Lab. Code § 226.
- [5] Cal. Lab. Code § 203.
- [6] See Cal. Lab. Code § 558.1.
Jeffrey M. Verdon, Esq. 
For more information about any of the information discussed in this Client Alert, or any other income or estate tax planning or asset protection planning assistance, please contact the: Jeffrey M. Verdon Law Group, LLP at jeff@jmvlaw.com or 949-333-8143.