Enforcement Wage Hour Laws

The act:

• Amends the definition of "employer" for purposes of wage and hour laws to include an individual who owns or controls at least 25% of the ownership interest in an employer;
• Prohibits an employer from making a payroll deduction below a worker's applicable minimum wage;
• Allows the director of the division of labor standards and statistics (division) to waive the penalty for an employer's failure to pay claimed wages or compensation within 14 days after a written demand if certain specified conditions are met; and
• Requires a court to find that an employee pursued a wage claim that lacked substantial justification before awarding an employer reasonable costs and attorney fees in a civil action for unpaid wages or compensation. In such an action, the court may pursue all equitable relief to deter future violations and prevent unjust enrichment.

Current law limits the ability of the director of the division to adjudicate claims for nonpayment of wages or compensation to $7,500 or less. The act increases this threshold over the years by increasing the maximum amount to $13,000 for claims filed from July 1, 2026, through December 31, 2027, and in an amount specified by the director of the division to adjust for inflation beginning January 1, 2028. The act also requires the division, in adjudicating wage claims, to determine whether a violation is willful. For each violation:

• The director shall publish on the division's website the names of all employers found to be in violation and whether the violation was willful; and
• If the violation was willful and is not remedied within 60 days after the division's finding that there was a violation, the division must notify all government bodies with the authority to deny, withdraw, or otherwise limit or impose remedial conditions on the employer's license, permit, registration, or other credential of the unremedied willful violation.

Additionally, the division may report an employer found to have violated a law related to wages and hours to any government body with authority to deny, withdraw, or otherwise limit or impose remedial conditions on the employer's license, permit, registration, or other credential. The act also repeals language requiring the division to issue a determination on a wage complaint within 90 days and clarifies that a city or county may enact and enforce wage laws within the city or county's jurisdiction.

An employer found to have misclassified an employee as a nonemployee must pay a fine in the following amounts, in addition to any other relief ordered:

• For a willful violation, $5,000;
• For a violation not remedied within 60 days after the division's finding, $10,000;
• For a second or subsequent willful violation within 5 years, $25,000; or
• For a second or subsequent willful violation not remedied within 60 days after the division's finding, $50,000.

The director of the division must adjust these fine amounts for inflation by January 1, 2028, and every other year thereafter.

The act also decreases the amount of time the division must wait before paying an employee out of the wage theft enforcement fund from 6 months to 120 days.

Current law prohibits an employer from discriminating or retaliating against an employee for taking protection under wage and hour laws or the law related to the employment of minors. The act expands this provision to specify additional protected behavior and expands the prohibition to include other persons in addition to employers.

The act also:

• Requires a fact finder to consider the time between an individual's exercise of a protected activity and an employer's adverse action when determining whether an employer has retaliated against the employee or worker;
• Specifies that it is a violation to use an individual's immigration status to discriminate or retaliate against an employee or worker who has engaged in protected activity; and
• Allows the division to order reasonable attorney fees and costs after investigating a discrimination or retaliation claim.

Between August 1, 2027, and October 1, 2027, the division must report to the joint budget committee on its progress in implementing the act.

In state fiscal year 2025-26, $328,210 is appropriated to the department of labor and employment for use by the division to implement the act.

(Note: This summary applies to this bill as enacted.)