How Is That Possible?
By Thomas F. Nowland, Esq.
Notice: The below article should only be considered as ‘general information’. Only a retained attorney that analyzes your specific situation, facts, and details, can offer you sound legal advice. The information below should not be considered legal advice for you and your situation, and your reading or relying on this information does not constitute representation, advisement, or an attorney-client relationship.
Copyright 2026 Nowland Law All Rights Reserved.
This employee was a problem from the start. They were always late, never followed directions, could not do the job, and created an unpleasant workplace environment. We had to let him go. He only worked for us for three months. Now he is suing me for $200,000.00! How is that possible?
And on top of that, he is suing me personally. I thought my corporation shielded me from liability?
How is that possible? Let me tell you.
As a labor lawyer practicing in California, I have had to answer this question hundreds of times, if not more. Here is the answer:
California businesses are inundated with employee labor lawsuits which have had a devastating financial impact on companies of all sizes from micro businesses to fortune five hundred companies. No California employer is immune from the devastating impact and resulting financial toll these lawsuits cause. Employment lawsuits place the employer in a no win scenario that will place their entire payroll record system under a microscope.
Managing employee medical issues, leave requests, overtime claims, meal and rest breaks, time off, vacation pay, and other issues can involve multiple employment laws at the same time. Unfortunately, most employers are just not knowledgeable about how these employment laws will be used against them by plaintiff attorneys and law firms.
There is no single comprehensive public tally for all state and local labor lawsuits filed across every California superior court in 2025. However, federal court data shows that the Central District of California alone recorded 1,646 employment cases in 2025, leading the nation, and Los Angeles County Superior Court tracked over 9,400 employment-law actions.
Plaintiff law firms are masters at using the California Labor Code as a sword to extract money from unsuspecting businesses. These plaintiff lawyers create issues of fact and make allegations that create a substantial financial burden and risk analysis problem on the employer.
How do they do that?
Plaintiff lawyers carefully craft a complaint to exploit the labor code’s technical mandates and hoping the unsuspecting employer lacks the sophistication and management capabilities to vigilantly document employee payroll, time keeping, time off requests, disability issues, and other soft target violations.
Corporate Veil Piercing
Guess what? That corporation that you painstakingly set up by hiring a lawyer, obtaining a corporate charter with the Secretary of State, does not shield you from labor law liability. The California Legislature has already pierced your corporate veil. Now you are personally named in this labor lawsuit.
How can they do that?
The short answer is the California Legislature enacted Labor Code section 558.1 in order to expand liability for wage and hour violations:
558.1. (a) Any employer or other person acting on behalf of an employer, who violates, or causes to be violated, any provision regulating minimum wages or hours and days of work in any order of the Industrial Welfare Commission, or violates, or causes to be violated, Sections 203, 226, 226.7, 1193.6, 1194, or 2802, may be held liable as the employer for such violation.
(b) For purposes of this section, the term “other person acting on behalf of an employer” is limited to a natural person who is an owner, director, officer, or managing agent of the employer, and the term “managing agent” has the same meaning as in subdivision (b) of Section 3294 of the Civil Code.
(c) Nothing in this section shall be construed to limit the definition of employer under existing law.
Do the courts allow this?
Yes they do. See White v. Ultramar, Inc. (1999) 21 Cal.4th 563, 573, and White v. Ultramar, Inc. (1999) 21 Cal.4th 563, 573, but see also Usher v. White (2021) 64 Cal.App.5th 883, 895, where the court held that: “[T]o be held liable under section 558.1, an ‘owner’… must either have been personally involved in the purported violation of one or more of the enumerated provisions; or, absent such personal involvement, had sufficient participation in the activities of the employer, including, for example, over those responsible for the alleged wage and hour violations, such that the ‘owner’ may be deemed to have contributed to, and thus for purposes of this statute, ‘cause[d]’ a violation.” Id. at pp. 896-897.
What does this mean?
It means that on the chessboard of litigation, the business owner, manager, or other named individual has been checked. The only possible move now is to go to trial and prove their non involvement in the aforementioned enumerated provisions. Plaintiff’s lawyer is betting that you will not take that risk, or expend the substantial financial resources to go to trial. More on the risks, costs, and possible outcomes later. Instead, plaintiff’s lawyer is looking for a fast settlement.
Time Records
The California Labor Code section 1174 requires employers to keep and maintain accurate records as follows:
Every person employing labor in this state shall:
(d) Keep, at a central location in the state or at the plants or establishments at which employees are employed, payroll records showing the hours worked daily by and the wages paid to, and the number of piece-rate units earned by and any applicable piece rate paid to, employees employed at the respective plants or establishments. These records shall be kept in accordance with rules established for this purpose by the commission, but in any case shall be kept on file for not less than three years. An employer shall not prohibit an employee from maintaining a personal record of hours worked, or, if paid on a piece-rate basis, piece-rate units earned.
How this law is used against you
The plaintiff’s lawyer will include allegations in the complaint alleging that you, the employer, directed the employee to work “off the clock.” In other words, you the employer demanded the employee to clock out and continue working. The implication being that you were exploiting the employee and engaging in wage theft.
How is this possible and do the courts allow this blatant falsification of the true facts?
The short answer is yes. The plaintiff’s lawyer added this little tidbit into the complaint to create an issue of fact that can only be decided, i.e., resolved, by a trial on the merits. That means that only a factfinder, i.e., a judge or a jury, can, after hearing all the evidence, decide if this is true or false. Plaintiff lawyers use this strategy to force the employer to face the prospect of going to trial. In other words, the plaintiff’s lawyer is taking your detailed and accurate time records off the table, and again, forcing you to trial and demanding a financial settlement in the alternative.
Why do they want to force a trial?
The simple answer is that by forcing a trial on the merits, they place the employer at a disadvantage in attempting to negotiate a settlement. Now, the employer not only has to calculate the financial demand of the wage theft allegations, but also the substantial cost of defending itself at trial in addition to the risks of losing at trial. More on the risks and possible outcomes of going to trial later.
Overtime
Under California Labor Code § 510, non-exempt employees must receive 1.5 times their regular rate of pay for working over 8 hours in a day or 40 hours in a week. Violations include back pay, interest, and statutory penalties which will add up to a substantial figure after the plaintiff’s lawyer analyzes your payroll and exploits every time card, pay check, and pay check stub.
Plaintiff lawyers skillfully exploit this violation, again, by adding the “employer forced by client to clock out, and “work off the clock.””
But wait a minute! I pay every employee overtime when they work over 8 hours a day and over 40 hours a week! How can this be?
This frustrating legal tactic unfortunately is allowed by the system. Remember, the plaintiff’s lawyer is using the system against you to extract a financial settlement. The system being the California Codee of Civil Procedure, Rules of Court, and cases law precedent. Your lawyer can’t just walk into court and tell the judge “these allegations are made up lies!” Instead, you have to prove it and that, again, requires a trial on the merits.
Meal Breaks
This is the low hanging fruit in the target rich environment of employment wage and hour litigation and plaintiff lawyers are masters at exploiting this law. Under California Labor Code § 512 employers must provide all hourly employees with a 30-minute uninterrupted, off-duty meal break for shifts exceeding five hours, and a second 30-minute meal break for shifts exceeding 10 hours. If an employer fails to provide a compliant meal break, they must pay the aggrieved employee one hour of premium pay at the regular hourly rate for each workday the break was missed or non-compliant.
You might also protest claiming that all of your employees, are not only entitled to a 30 minute meal break each day but most of them take far more than 30 minutes. In fact, it’s like herding cats trying to enforce the 30 minute rule!
How this law is used against you
Plaintiff’s lawyer will add another legal tidbit into the complaint similar to the “forced to work off the clock” false allegation. Here, plaintiff’s lawyer will add that the aggrieved employee may have received the required meal breaks but the breaks were “non compliant” because they were not “uninterrupted.” In other words, the employee was forced to work during the lunch period. Again, something that can only be determined by a trial on the merits.
Rest Breaks
Another easy target for plaintiff lawyers. In California, all non-exempt (hourly) employees are entitled to a paid, 10-minute uninterrupted rest period for every four hours worked or major fraction thereof. Employees must be relieved of all work duties and the employer cannot control how they spend the time. Employees can leave the work premises during a rest break.
In California, rest periods are primarily required by the Industrial Welfare Commission (IWC) Wage Orders, while Labor Code § 226.7 establishes the penalty and premium pay enforcement if an employer fails to provide the required rest breaks. As you can see, premium pay penalties and interest can add up to a substantial dollar amount and you can bet that plaintiff’s lawyer will allege that the aggrieved employe worked every day and never got the required rest breaks.
How this law is used against you
You guessed it. The plaintiff’s lawyer will allege that you made the employee work during the rest period. Again, now you are faced with the Hobson’s Choice of paying the extortion money or taking your chances at an expensive and risky trial.
The other “catch all” allegations
Plaintiff lawyers in employment litigation rarely leave labor code violation allegations to just overtime, record keeping, rest breaks, and meal breaks. They frequently add the even more subjective allegations of disability discrimination, hostile work environment, failure to engage in the interactive process, and top it off with wrongful termination and unfair competition.
These are frequently just made up lies and nonsense strategically designed to, again force you to pay some ridiculous amount of money to settle the case or take your chances at trial.
How can they do that? We never discriminate against anyone
Let me explain. Discrimination claims provides the basis for plaintiff’s lawyer to plead for punitive damages. In other words, you the employer are so evil and discriminatory, that you should be further punished financially. By adding this punitive damages claim, the plaintiff’ lawyer puts your financial assets and profits in play. Now, a jury can look at your finances and decide how much financial punishment you deserve. And you can bet plaintiff’s lawyer will argue for a 6 or 7 figure punitive damages award. This could potentially force a small business into bankruptcy.
How can this happen?
The usual scenario is that the problem employee quit, or just stopped showing up for work. One day you receive a summons and lawsuit. In that lawsuit, the plaintiff’s lawyer will allege the employee was sick or and a preexisting medical condition which required him to be placed on modified assignment or otherwise accommodated. Since you failed to do that, you have engaged in disability discrimination. Further allegations will claim that in addition to the failure to accommodate, that you or other employees, made fun of the aggrieved employee and made the workplace environment so hostile that the employee was forced to quit. You see, it was all your fault that this person could not show up on time, could not do the job, and had to quit.
Choices
The first choice is to pay the ridiculous financial demand put forth by plaintiff’s lawyer. This choice has its obvious pros and cons depending upon the amount of money demanded.
The second choice is to tell the plaintiff’s lawyer to go pound sand; see you in court. This is not a good idea, and I will tell you why.
The short answer to this question is that even if you did everything correctly and followed the law, you could still lose.
How could I still lose if I did everything correctly?
Juries get it wrong all the time.
Trial
Going to trial is expensive and time consuming, not to mention risky. You face the risk that even if the jury believes you instead of the employee, they may feel sorry for him and award him a smaller amount of money than his lawyer initially proved at trial.
If this happens, plaintiff will be deemed the prevailing party and plaintiff’s lawyer will file a motion for attorney fees and costs which will likely be in the low to mid 6 figure sum or even higher. You have spent a great deal on money on your own legal defense and now you are faced with paying the judgment to the employee I addition to his lawyer’s attorney fees.
And, for the sake of argument, assume that you go to trial and win, what have you won? Nothing. You are still out of pocket several hundred thousand dollars. Yes, that is the reality of going to trial.
Can’t I get my money back for defending a frivolous lawsuit?
The short answer is no. There is no reciprocal statutory attorney fee provision in the labor code. In other words, if you lose, you pay your employee’s attorney, if you win, you pay your own attorney. Is that fair? No, but that’s the reality of defending an employment lawsuit in California today.
What if I sue the employee for frivolous litigation?
Not a good idea and I’ll tell you why. First of all, it is unlikely that that the employee has the financial ability to pay a six figure judgment. Second, the standard to determine frivolity is high. Losing a lawsuit does not mean it was frivolous. You have to prove it had no basis and was brought for an improper purpose. A very high bar. The third reason is the Anti-SLAPP motion to strike. If you sue someone for suing you, they can file an anti-slap motion to strike. SLAPP is an acronym for strategic lawsuit against public policy, which requires you to show a likelihood of success on the merits. The motion would likely be sustained by the court, resulting in you paying the employee’s attorneys fees.
The high cost of going to trial and why is it so expensive?
Pre-trial
The pre-trial time period from service of summons and complaint to the first day of trial at the courthouse could take 1.5 to 2 years. During this period all discovery, depositions, expert retention, discovery battles, and all other pre-trail work is completed. A defendant employer can expect to spend upwards of $150,000 to $200,000.
Trial
A trial retainer, depending upon how many days are scheduled, ranges from $75,000 to 100,000. This is due to the fact that you will likely have a senior attorney, an associate, and a paralegal all in attendance defending the case. Some of these legal fees are used dealing with the courthouse backlog as when you do get there on the date scheduled by the court, there may or may not be an available courtroom which requires your legal counsel to wait for availability. This may require waiting all day at the courthouse which means paying legal counsel to wait. This could go on for a few days. Sounds inefficient and it is but that is the reality.
Post Trial
After trial, depending on the verdict, there may be post-trial motions i.e., motion for reconsideration, motion for judgment notwithstanding the verdict, and perhaps an appeal. All of this legal work consumes additional resources which could exceed an additional $20,000 not including appellate work.
For more information regarding this topic and other employment law issues, please contact attorney Thomas F. Nowland at www.nowlandlaw.com.
