Under newly enacted California Assembly Bill 1003 (AB 1003), any employer found to have engaged in the intentional theft of wages, gratuities, benefits, or other compensation, in an amount greater than $950 from any one employee, or $2,350 in the aggregate from 2 or more employees, in any consecutive 12-month period may be convicted of grand theft. These wages, gratuities, benefits, or other compensation that are the subject of a prosecution under these provisions can be recovered as restitution. For the purposes of these provisions, independent contractors are included within the meaning of employee, and hiring entities of independent contractors are included within the meaning of employer.

Under the new law it is imperative that employers timely pay their employees and their independent contractors, provided there is no good faith bona fide dispute over the compensation due. The impetus for the new law arose from tip pooling arrangements where the employer took a portion of the tips. However, it is not limited to such circumstances. Under the expansive new provision employers now run the risk of criminal prosecution if they intentionally fail to timely pay or provide any portion of an employee’s or independent contractor’s wage, gratuities, benefits or other compensation.

Before an employer withholds any portion of an employee’s or independent contractor’s wages, gratuities, benefits or other compensation it is essential that the employer consult with its legal counsel in order to avoid criminal grand theft charges.

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.