Employers with unsatisfied judgments: Don’t forget to comply with Labor Code §238 Bond Requirement

On October 11, 2015, the Governor signed into law SB 588, which added Labor Code §238 and went into effect January 1, 2016.

If a final judgment against an employer arising from the employer’s nonpayment of wages remains unsatisfied for 90 days, an employer is prohibited from continuing to conduct business unless the employer has obtained a bond from a surety company and has filed a copy of that bond with the Labor Commissioner. As an alternative to the bond requirement, the employer may provide the Labor Commissioner with a notarized copy of an accord reached with an individual holding an unsatisfied final judgment. Any employer conducting business without satisfying the bond requirement subject to a specified civil penalty, $2,500.00 for the initial violation and $100 per day for subsequent violations not to exceed $100,000.00.

The Labor Commissioner under §238.1 may also issue to employers who violate Labor Code §238 a stop order prohibiting use of employee labor.   An employer, owner, director, officer, or managing agent of the employer who fails to observe a stop order issued and served upon him or her is guilty of a misdemeanor.