Iloff v. LaPaille: California Minimum-Wage Good-Faith Defense

Read the source decision or official guidance.

An informal work arrangement does not necessarily eliminate California minimum-wage and paid-sick-leave obligations. In Iloff v. LaPaille, the California Supreme Court addressed a worker who performed maintenance services in exchange for free rent without ordinary wages or benefits.

The unanimous decision clarifies what an employer must show to reduce or avoid liquidated damages after a minimum-wage violation and confirms that a paid-sick-leave claim may be raised in a superior-court appeal from a Labor Commissioner proceeding.

The minimum-wage good-faith defense

Labor Code section 1194.2 generally provides liquidated damages equal to unlawfully unpaid minimum wages plus interest. A court may reduce or deny that amount if the employer proves good faith and reasonable grounds for believing its conduct was lawful.

The Supreme Court held that statutory ignorance does not constitute good faith under Labor Code section 1194.2. To avoid liquidated damages, an employer must prove an affirmative, reasonable attempt to ascertain and comply with governing California minimum-wage requirements. In Iloff, the parties’ understanding that services would be exchanged for rent did not establish that the employers had investigated their legal obligations.

The holding does not mean every wage mistake automatically results in the same award. The employee must establish the violation, and the available remedies depend on the claims, evidence, and governing provisions.

Paid sick leave in a Labor Commissioner appeal

The court also held that an employee may raise a claim under California’s Healthy Workplaces, Healthy Families Act when the employer appeals a Labor Commissioner ruling for a new trial in superior court. The proceeding is a trial de novo, and the court rejected the narrower procedural limit applied below.

Practical lessons for workers

Workers paid through rent credits, cash, flat weekly amounts, day rates, or other informal arrangements should preserve:

• records of hours and duties;
• messages describing the compensation arrangement;
• rent ledgers or credits;
• requests for wages or paid sick leave;
• pay statements, if any; and
• Labor Commissioner filings and hearing records.

Whether someone is an employee rather than an independent contractor or volunteer remains a separate, fact-dependent question. Labels chosen by the parties do not necessarily control.

Key takeaways

• Ignorance of minimum-wage law does not by itself establish good faith.
• The employer must show a reasonable attempt to determine the governing requirements.
• Liquidated damages and unpaid wages are related but distinct remedies.
• Paid-sick-leave claims may be considered in the employer’s de novo appeal from a Labor Commissioner ruling.

Mishra X Trial Lawyers evaluates California wage, classification, and paid-leave disputes. Call (949) 343-9735 or email office@mishrax.com.