Ignorance of the Law Alone is Insufficient to establish a Good Faith Defense for the Failure to Pay Minimum Wages

In Iloff v. LaPaille, 2025 WL 2414467 (Aug. 21, 2025), the California Supreme Court clarified the burden on employers when asserting a good faith defense to the failure to pay minimum wages, as allowed by California Labor Code section 1194.2(b). So doing, the Court made clear that ignorance of the law, alone, is insufficient to establish the defense. In addition, the employer must also establish that it made a reasonable attempt to determine the requirements of the law governing minimum wages.

Iloff lived and worked on a property owned and managed by Cynthia LaPaille and Bridgeville Properties, Inc. (the "employers"). Although Iloff performed maintenance on the property pursuant to the instructions, directions, and approvals of the employers, the employers classified Iloff as an independent contractor. The trial court found that Iloff was an employee and was therefore entitled to unpaid wages penalties and and interest. However, the trial court ruled that Iloff was not entitled to liquidated damages because his employers acted in "good faith" in not paying him and had "reasonable grounds for believing" they were complying with the law governing minimum wages. The Court of Appeal affirmed the trial court's ruling.

Reversing the Court of Appeal, the California Supreme Court explained that to present a "good faith" defense an employer must make a showing that it attempted to determine the requirements of the law governing minimum wages. At trial, the employers did not claim they attempted to determine what the law required at any point during Iloff's employment, and they presented no evidence even suggesting that they made any such attempt. Per the Court, because Iloff's employers "did not show they made any attempt to determine what the law required and comply with those requirements, they did not prove the good faith defense." (Emphasis in Original). Citing to legislative history, the Court outlined the purpose of the liquidated damages provision, and emphasized: "[l]iquidated damages would be much less effective as an enforcement tool and a means of deterring minimum wage violations if an employer could evade them merely by showing that it was ignorant of the law. It would be contrary to the Legislature's intent to permit an employer that had not made a reasonable attempt to determine the requirements of the law governing minimum wages to invoke its ignorance in support of the defense."

The California Supreme Court also clarified that employers cannot rely on the nebulous "the law is unclear" defense to meet the evidentiary requirements for a good faith defense. Rejecting this notion, the Court explained "[h]aving made no attempt to determine the requirements of the law, the employers cannot rely on arguments concerning the unsettled state of that law to prove that they acted in good faith in failing to comply with its requirements." (Citing Alvarez v. IBP, Inc., 339 F.3d 894, 910 (9th Cir. 2003), for the truism that "[a]fter-the-fact 'explanations and justification' does not constitute 'evidence to show that [an employer] actively endeavored to ensure . . . compliance.'") Quoting McFeeley v. Jackson St. Entertainment, LLC, 825 F.3d 235, 245 (4th Cir. 2016), the Court stated the obvious: "If the 'mere assumption' that minimum wage law was inapplicable were sufficient to prove good faith, 'no employer would have any incentive to educate itself and proactively conform to governing labor law.'"

On a separate issue, the Court also held that an employee may raise claims under the Paid Sick Leave law, California Labor Code section 245, et seq., in the superior court in response to an employer's appeal of a Labor Commissioner's ruling in a Berman hearing, even though the employee did not present these claims to the Labor Commissioner.