California law imposes numerous requirements on employers, including minimum wage and paid sick leave rules, among others. It also allows employees to enforce their rights by bringing lawsuits in court, but that is not their only recourse. In some instances, employees pursue administrative claims before the California Labor Commissioner under a cost-free vehicle, called the “Berman process.” Employees have access to this administrative process without the need to retain an attorney or incur any legal fees. When employees pursue such claims, the losing party has the opportunity to appeal the decision to the superior court.
1. The Supreme Court’s Iloff Decision
These issues converged in the Supreme Court’s August 21, 2025 decision in Iloff v. LaPaille, __ Cal. 5th __ (2025), a case initiated by a maintenance worker (Iloff) against Bridgeville Properties and a manager, Cynthia LaPaille (together, the “employers”). Iloff lived rent-free in a house owned by his employers and performed maintenance services under the employers’ directions. He was not provided any benefits or compensation for his services. When the relationship ended, Iloff brought an action against the employers with the Labor Commissioner, initiating the Berman process for adjudicating wage claims.
In response to Iloff’s claim, the employers argued he was an independent contractor. The Labor Commissioner disagreed. It issued an “order, decision, or award” finding Iloff was an employee and, as such, was entitled to unpaid wages, liquidated damages, penalties, and interest.
The employers appealed, seeking review of the ruling in the superior court under Labor Code Section 98.2. In response, Iloff – who was now provided free representation by an attorney from the Labor Commissioner’s office, filed a notice of claims. In the notice, Iloff reasserted the wage claims he had raised before the Labor Commissioner and added new claims, including a claim for penalties under California’s paid sick leave law in Labor Code Sections 245 – 249.
2. The Supreme Court Addressed Two Questions
The Supreme Court examined two issues. First, it considered whether the employers were liable for “liquidated damages” (a form of double damages) based on their minimum wage violations. Second, it addressed the question whether the employee could add new claims, such as a paid sick leave claim, after the employer appealed the Labor Commissioner’s ruling.
The Supreme Court concluded that the employers were vulnerable to an award of liquidated damages for the minimum wage claims because they had no defense. They did not establish a “good faith” defense to liquidated damages by showing they took reasonable steps to comply with their minimum wage obligations. It stated that mere “ignorance of the law” was insufficient to negate such an award.
Notably, the Supreme Court recognized for the first time that no “private right of action” existed to seek administrative penalties under California’s paid sick leave law, Labor Code Section 248.5. Nevertheless, the Supreme Court reasoned that a Berman appeal is not a “private right of action.” Instead, it is a procedure for de novo reconsideration of the Labor Commissioner’s ruling in the administrative stage of the Berman process. Thus, even though the employee did not have a private right of action allowing him to file a paid sick leave claim directly in court, he could pursue a paid sick leave claim (or another wage claim) as part of his response to his employer’s appeal.
3. The Minimum Wage And Liquidated Damage Claims
a. Employers Must Take Reasonable Steps To Comply With The Minimum Wage Law To Establish Good Faith
Because the employers did not pay Iloff any compensation for his services, they were liable for minimum wage violations. The next question was whether they were also liable under Labor Code Sections 1194-1194.2 for liquidated damages in an amount equal to the wages unlawfully unpaid, i.e., double the minimum wage liability. Based on the Labor Code, liquidated damage liability must be imposed unless the employer establishes a “good faith” defense under Section 1194.2(b).
The Supreme Court stated, “When a court finds an employee is entitled to unpaid minimum wages, . . . , the court must award the employee ‘liquidated damages in an amount equal to the wages unlawfully unpaid and interest thereon.’” The employer then has the burden “to establish the defense by proving that ‘the act or omission giving rise to the action was in good faith and that the employer had reasonable grounds for believing that the act or omission was not a violation.’ (Ibid.) If the employer carries this burden, the provision authorizes the court, ‘as a matter of discretion’ to deny a request for liquidated damages or order less than the full amount to which the employee would otherwise be entitled.”
b. Employers Must Attempt To Determine Their Minimum Wage Obligations
As explained by the Supreme Court, the employer must show that it made (1) a reasonable attempt to determine the requirements of the law governing minimum wages and (2) a good faith effort to comply with those requirements. In the case before it, the employers failed to meet the standards because they did not show they made any attempt to make certain they met their minimum wage obligations. The employers’ independent contractor defense was developed in response to the claim, not because the employers had looked into their minimum wage obligations earlier.
When an employer has made a reasonable effort to determine the requirements of the law governing minimum wages, a court may consider evidence of the nature of the parties’ relationship, e.g., whether there was an independent contractor relationship, their agreements with each other, and the legal landscape in determining whether the employer made a good faith effort to comply with those requirements. However, where, as here, the employers did not show they made ‘any attempt to determine whether their arrangement with Iloff complied with the law governing minimum wages, they could not rely on arguments regarding the unsettled state of the law to prove that they acted in good faith in failing to comply with its requirements.
c. Neither Ignorance Of The Law, Nor Waivers Are Substitutes For “Good Faith”
The Supreme Court also refuted other proposed defenses. It determined it did not matter whether an employee agreed to be paid less than the minimum wage because the right to minimum wages cannot be waived. Finally, it recited the age-old adage that “ignorance of the law is no excuse.” Consequently, the fact that the employers did not understand they were required to pay Iloff the minimum wage was not a defense, as “ignorance alone” does not prove good faith. Again, an employer must show it made a reasonable attempt to determine the requirements of the minimum wage law. Because the employers did not make this showing, Iloff was entitled to an award of liquidated damages.
The Supreme Court added emphasis to its holding, making it clear that, to establish the “good faith” defense to liability for liquidated damages under Labor Code Section 1194.2(b), an employer must show that “it made an attempt to determine what the law required. . . . While the form and extent of the required attempt is context dependent, the burden is on the employer to show it made an attempt to determine what the law required that was reasonable under the circumstances and a good faith effort to comply with the requirements of the law.”
4. Employees Can Raise Paid Sick Leave (Or Other Wage) Claims If An Employer Appeals A Labor Commissioner Ruling
a. Iloff’s Paid Sick Leave Claim
The second question addressed by the Supreme Court relates to the paid sick leave law, the Healthy Workplaces, Healthy Families Act, Labor Code §§ 245, et seq. The Act requires California employers to provide employees paid leave from work for health-related reasons or to care for sick family members.
Although Iloff did not allege a violation of the Act in his initial claim before the Labor Commissioner, he raised a claim for penalties in the notice of claims he filed in the superior court in response to his employers’ appeal of the Labor Commissioner’s ruling. The question was whether the superior court may consider a paid sick leave claim raised in this manner. The Supreme Court determined that it could.
b. Employees Can Raise New Sick Leave Claims If Employers Appeal
As a preliminary matter, the Supreme Court agreed the law authorizes employees to raise paid sick leave claims before the Labor Commissioner, which has authority to adjudicate such claims under Labor Code Section 248.5. However, it disagreed with the court of appeal’s conclusion that an employee may not raise a new claim in response to an employer’s appeal from the Labor Commissioner’s ruling.
It previously held in Murphy v. Kenneth Cole Productions, Inc., 40 Cal. 4th 1004 (2007), that a superior court can allow an employee to raise additional claims (such as additional wage claims) that the Labor Commissioner did not consider during the Berman process. It was therefore easy to extend the Murphy decision to paid sick leave claims.
c. A Berman Appeal Is Not A Private Right Of Action
The Supreme Court concluded “there is no private right of action to seek administrative penalties under section 248.5.” Citing Seviour-Hoff v. LaPaille, 80 Cal.App. 5th 427, 450 (2022), there is nothing in the Section 248.5 that “indicates a private right of action.” A Berman appeal, however, “is not a private right of action. Instead, it is a procedure for de novo reconsideration of the Labor Commissioner’s ruling in the administrative stage of the Berman process.” The Supreme Court added, “[w]ithout a private right of action, employees are left with the Berman process as their sole avenue for vindicating their rights under the Paid Sick Leave Law. See Wood v. Kaiser Foundation Hospitals (2023) 88 Cal.App.5th 742, 757.”
In short, an employee can raise a paid sick leave claim either directly in a Labor Commissioner claim or in response to the employer’s appeal of the Labor Commissioner’s ruling. The Supreme Court then commented about PAGA claims in a footnote, stating that Wood held Section 248.5 does not preclude an employee from bringing a PAGA action based on a failure to comply with the paid sick leave law; however, as proxy of the labor law enforcement agencies in a PAGA action, the employee may recover “only civil penalties” that would otherwise be assessed and collected by the state.
5. Conclusion
The Iloff decision addresses issues that appear fairly limited in scope and significance in an era marked by massive class action and PAGA litigation. Instead of cases that dissect claims involving hundreds or thousands of individuals, Iloff focused on a Labor Commissioner hearing resolving a minimum wage and liquidated damages claim of a single maintenance worker who was not paid any benefits or compensation, but was provided rent-free housing. In an unanimous decision, the Supreme Court disagreed with the court of appeal’s conclusion that the employers qualified for the good faith defense to liquidated damages. It returned the case to the lower court to take further proceedings consistent with the decision.
One can only wonder how the legal fees engendered by the litigation compared to the wages Iloff was eventually awarded. From a philosophical perspective, it would have been far less expensive for the employers to have investigated their legal obligations before entering into the working relationship rather than seeking to dig themselves out of a legal hole for years.
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About The Author
Richard J. Simmons is a Partner in the law firm of Sheppard, Mullin, Richter & Hampton LLP in Los Angeles. He represents employers in various employment law matters involving litigation throughout the country and general advice regarding state and federal wage and hour laws, employment discrimination, wrongful discharge, employee discipline and termination, employee benefits, affirmative action, union representation proceedings, and arbitrations. Mr. Simmons received his B.A., summa cum laude, from the University of Massachusetts, where he was a Commonwealth Scholar and graduated in the Phi Kappa Phi Honor Society. He received his J.D. from Berkeley Law at the University of California at Berkeley where he was the Editor-in-Chief of the Industrial Relations Law Journal, now the Berkeley Journal of Employment and Labor Law.
Mr. Simmons argued the only case before the California Supreme Court that produced a victory for employers and business in 2018. He was recently recognized as the Labor and Employment Attorney of the Year by the Los Angeles Business Journal and was inducted into the Employment Lawyers Hall of Fame. He has lectured nationally on wage and hour, employment discrimination, wrongful termination, and other employment and labor relations matters. He is a member of the National Advisory Board to the Berkeley Journal of Employment and Labor Law, published by Berkeley Law at the University of California at Berkeley. He was also appointed by the California Industrial Welfare Commission as a member of three Minimum Wage Boards for the State of California.
