The California Court of Appeal’s recent decision in Diaz v. Grill Concepts Services, Inc. confirms just how important it is to stay on top of local and federal employment regulations.  Substantial penalties were assessed against Grill Concepts Services, Inc. because the company was unaware of a local wage change and accidentally shortchanged its workers’ pay.  The court affirmed that a lack of malicious intent did not protect the employer from allegations of a “willful” failure to pay.

In Diaz, the employer operated a restaurant near the LAX airport, located within a unique zone that amended its living wage formula in 2010.  Unaware of the change in formula, the restaurant failed to adjust employees’ wages and shortchanged the workers, who filed a class action demanding unpaid wages and “waiting time” penalties.  Under California Labor Code, “waiting time” penalties in the form of up to 30 days’ wages may be assessed against employers that willfully fail to pay any part of an exiting employee’s wages.

The court stated that where the law is clear regarding an employer’s responsibilities, a “willful failure” occurs when the employer voluntarily acts in a manner that falls short of its legal obligations.  Because of the restaurant’s lack of due diligence in following the 2010 living wage amendment, and because the language of the relevant law was clear regarding the employer’s responsibility, the court stated that the restaurant’s ignorance of the law qualified as a willful failure.

The court’s determination in Diaz serves as a warning and a reminder to all employers of the importance of diligent follow-up and compliance with both local and federal regulations.