On August 21, 2025, in Iloff v. LaPaille, the California Supreme Court made clear that ignorance of the law is no defense to liability when it comes to paying “liquidated” damages for minimum wage violations. The high court ruled that employers who intend to rely on the “good faith” defense to avoid paying “liquidated” or double damages must prove that they made a reasonable attempt to determine the requirements of the law.
In this case, the employee, Laurence Iloff, lived and performed maintenance work on property owned by Bridgeville Properties, Inc. and managed by Cynthia LaPaille. Under an informal agreement, Iloff was allowed to live rent-free on the property in exchange for his maintenance work. He received no other wages or benefits.
After the arrangement ended, Iloff filed a claim with the California Labor Commissioner alleging he was an employee, not an independent contractor. He claimed unpaid wages, interest, and penalties, including liquidated damages under California Labor Code section 1194.2, which requires employers to pay double for any unpaid minimum wages.
The trial court determined Iloff was properly classified as an employee but found in favor of LaPaille on the issue of liquidated damages, concluding that LaPaille had acted in “good faith” and had “reasonable grounds” to believe they were complying with the minimum wage laws. This conclusion was based on the court’s finding that Iloff and LaPaille had a mutual understanding that the maintenance work performed was in exchange for free rent, and that neither party believed Iloff would be compensated with wages or considered an employee.
The Court of Appeal upheld this ruling, but the California Supreme Court reversed, holding that liquidated damages must be awarded and LaPaille’s mere ignorance of the law (even when based on the parties’ mutual understanding) was insufficient to establish a good faith defense. It concluded that a valid “good faith” defense requires an employer prove it made reasonable attempts to determine what the minimum wage law required and that ignorance alone does not prove good faith. However, the high court declined to adopt a rigid formula of what constitutes a “reasonable attempt” to determine the law, noting that the “form and extent of the required attempt is context dependent.”
The Iloff decision underscores how important it is for employers to stay informed of California wage and hour laws, audit their payroll practices regularly, and take proactive compliance measures to avoid violations and penalties – including liquidated damages for minimum wage violations.
The attorneys at Duggan McHugh are available to assist employers in navigating and staying compliant with the ever-changing California wage and labor laws.