New California Law Imposes Massive Fines on Employers Who Refuse to Pay Stolen Wages

State and local officials said that employers have historically been able to ignore court-ordered wage judgments with impunity, leaving tens of thousands of workers uncompensated.

“There has not been any repercussion for employers that refuse to pay on wage theft judgment. This law changes that,” said Tony LoPresti, county counsel for Santa Clara County. He noted that the monetary loss from wage theft nationwide is “five times what the monetary loss is for burglary and larceny and robbery combined.”

Starting Jan. 1, 2026, employers who refuse to pay a wage theft judgment for 180 days will face a civil penalty of up to three times the outstanding judgment amount, plus interest.

Half of the resulting penalty will go directly to the affected workers, while the other half supports increased enforcement efforts by the Division of Labor Standards Enforcement.

The bill also requires courts award workers and county prosecutors reasonable attorney fees and costs, making efforts towards enforcement of the law more sustainable, LoPresti said.

Furthermore, the law will help prevent companies from simply closing and reorganizing to erase their debt, according to Ruth Silver Taube, supervising attorney of the Worker’s Rights Clinic at Santa Clara University School of Law.

“This collaboration is a model for everybody in our communities to recognize that the economy, that workers, that government, and leaders can come together and say we demand better for working families,” said Jean Cohen, executive officer of the South Bay AFL-CIO Labor Council. “This legislation is a perfect example of the outcome of that commitment.”

Wage theft is a particularly serious problem in Santa Clara County. Supervisor Betty Duong noted that since 2010, the Labor Commissioner’s Office has issued over $35 million in unpaid wage theft judgments in the county alone.

“Wage theft isn’t a victimless crime. It’s the theft of rent money, grocery money and child care money,” Duong said.

The failure to collect disproportionately impacts vulnerable groups. According to Wahab, workers in industries like construction — many of whom are immigrants and English language learners — are highly susceptible to wage theft and rarely see payments after winning their claims. Collection statistics underscore this crisis: a 2023 California State Auditor report found that the Labor Commission only fully collected on 12% of judgments between 2018 and 2023.

“Some days at the Law Center’s clinic and on the advice line, I will get five or six clients coming in, or callers calling, that have not got wage theft judgment paid for years and years,” Taube said. “And it’s a huge problem, and it’s heartbreaking to hear their stories because they’ve actually done the work, went through a hearing, and a judgment was recorded.”

Santa Clara County’s own programs served as a model for SB 261. The county’s Food Permit Enforcement Program leverages health permits to compel food retailers with unpaid wage judgments to comply, or risk losing their authorization to operate.

Duong confirmed that the county’s permits are contingent on following all applicable workplace laws, meaning that employers with unpaid judgments should now expect issues with permits.

Since 2019, this program has helped collect more than $110,000 for workers.

Now, LoPresti said the state can ensure that justice for workers no longer “ends with a piece of paper. It ends with a paycheck”