California Enhances Wage Judgment Enforcement

The California State Senate has passed Senate Bill 261 (“SB 261”) and sent it to Governor Gavin Newsom for review. The governor must decide by October 13 whether to sign the bill into law. If enacted, SB 261 would overhaul how wage judgments are enforced in California, imposing stricter penalties and higher litigation costs on employers.

If you or your business require legal support in California labor contracts and compliance, please contact our Partner, Fiona Xu, at contact@consultils.com. Our team provides professional and efficient compliance solutions to help companies effectively prevent and resolve employment-related risks.

Key Provisions

SB 261 aims to strengthen the enforceability of wage judgments by increasing penalties and cost recovery, thereby compelling employers to fulfill payment obligations promptly. Specifically, SB 261 introduces new requirements for lawsuits involving wage disputes — such as overtime pay, minimum wage, misclassification of employees as 1099 independent contractors, and meal and rest break violations.

Mandatory Attorney’s Fees and Costs

Employers would be required to pay prevailing employees’ reasonable attorney’s fees and litigation costs in wage-related lawsuits — including cases brought by individual employees, the Labor Commissioner, or public prosecutors.

Enhanced Penalties for Non-Payment

Employers who fail to satisfy a final wage judgment within 180 days after the appeal period expires could face civil penalties up to triple the unpaid amount (plus interest). Half of any penalty would go to the affected employees, and the other half to the Division of Labor Standards Enforcement (DLSE).

Higher Appeal Costs

Employers appealing a wage judgment would first have to post a bond equal to the judgment amount. If the employer loses on appeal — even if the employee’s recovery is minimal — the employer must also cover the employee’s reasonable appellate attorney’s fees and costs.

Successor Liability

Corporate restructuring or asset sales would not erase liability. Successor companies would remain responsible for outstanding wage judgments.

Impact on Employers

SB 261 would shift litigation risk sharply toward employers. Because attorney’s fees would be recoverable, employees could pursue wage claims with little upfront cost, likely increasing the volume of lawsuits.

It would also raise the financial stakes of appealing: unless an employer has strong grounds to overturn a trial judgment (e.g., new evidence or legal error), the appeal bond and potential fee exposure could make appeals cost-prohibitive.

For many small and mid-sized businesses, the 180-day payment deadline and potential triple penalties could create significant cash-flow pressure.

What Employers Should Do?

If SB 261 is enacted, employers are advised to take the following measures to mitigate potential risks.

Strengthen Wage & Hour Compliance

Audit employee classifications, overtime practices, meal/rest breaks, and final pay procedures. Update internal policies and train managers to reduce wage disputes at the source.

Assess Appeal Strategy Carefully

Evaluate the likelihood of success and prepare financially for bonds and additional costs before appealing any wage judgment.

Pay Judgments Promptly When Necessary

If the chances of winning on appeal are low, consider settling or arranging prompt payment (or a written installment plan) to avoid penalties.

Review Wage Liabilities in Transactions

Include wage judgments and related liens in due diligence during mergers, acquisitions, and investments. Use indemnification or escrow terms to manage successor risk.

If you or your business require legal support in California labor contracts and compliance, please contact our Partner, Fiona Xu, at contact@consultils.com. Our team provides professional and efficient compliance solutions to help companies effectively prevent and resolve employment-related risks.

Disclaimer: The materials provided on this website are for general informational purposes only and do not, and are not intended to, constitute legal advice. You should not act or refrain from acting based on any information provided here. Please consult with your own legal counsel regarding your specific situation and legal questions.

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As Partner and Head of Transactions at ILS, Fiona delivers professional legal and strategic support to tech companies—with a focus on AI, medical devices, and fintech. Beyond full-spectrum technology law, she specializes in export control and compliance: supporting tech firms at all growth stages, aiding startups in scaling operations, and helping mature enterprises address regulatory challenges.

Previously, Fiona gained hands-on experience building legal frameworks from scratch. She advised unicorn companies on global expansion and regulatory hurdles, developing deep insight into clients’ growth challenges. Combining legal expertise with commercial judgment, she helps clients establish sustainable legal processes and provides clear guidance to advance their business.

Email:  contact@consultils.com | Phone: 626-344-8949