California Supreme Court Strengthens Worker Protections: Key Rulings on Wage Laws and Paid Sick Leave Enforcement

On August 21, 2025, the California Supreme Court in Iloff v. LaPaille issued a ruling with two major impacts for employers statewide: it raised the bar for the "good faith" defense against liquidated damages in minimum wage disputes and confirmed that employees can pursue Paid Sick Leave penalties even after an employer appeals a Labor Commissioner’s ruling.

Liquidated Damages: Increased Employer Responsibility

• The Court clarified that a business cannot avoid liquidated damages for minimum wage violations simply by showing it did not realize payment was required, or by relying on informal agreements such as work-for-rent arrangements.^[1]

• To successfully claim a "good faith" defense, an employer must show it made a reasonable and active effort to understand and comply with minimum wage laws under Labor Code § 1194.2—casual ignorance or after-the-fact explanations will not suffice.

• This standard depends on context: a larger or more established businesses are expected to undertake a more thorough inquiry, potentially consulting legal counsel or HR professionals; while smaller or casual employers may have some leeway due to their limited resources or experience, but all must be able to demonstrate some effort to comply.

Paid Sick Leave Claims: Expanded Exposure on Appeal

• The Court ruled that employees can raise new claims under the Healthy Workplaces, Healthy Families Act of 2014 (Paid Sick Leave law) during the employer’s appeal to the superior court following a Labor Commissioner decision (the "Berman appeal"). This ensures paid sick leave claims are considered and not dismissed simply because the employer appealed.

Practical Takeaways for Employers and HR

• Actively review and understand California minimum wage and paid sick leave laws. Ignorance is not a defense to violations.

• Keep records showing your efforts to comply—consult legal counsel, use official guidance, and maintain written policies.

• Regularly verify employee classifications and that all compensation meets or exceeds minimum wage and leave requirements.

• Agreements like “work for rent” do not exempt you from paying wages and benefits legally owed.

• If you appeal a Labor Commissioner ruling, expect employees may raise new claims. Engage legal counsel early.

• Educate management and payroll teams on employment laws and your company’s obligations.

• Address any suspected compliance issues immediately to avoid costly penalties and damages.

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Law Offices of Samira Amato - www.samiralaw.com