COVID-19 Inspection Leads to $1.3 Million Minimum Wage Assessment

The California Labor Commissioner has assessed Irvine’s Perfect Point Corp. dba South Coast Gymnastics and its owner, Xiaoping Li, $1.3 million for wage and hour violations affecting 28 coaches and administrative staff after a COVID-19 compliance inspection turned into a payroll audit of the preceding three years.

Labor Commissioner Lilia García-Brower stated: “California law requires that workers be paid for all hours worked. Anything less is wage theft. My office is committed to ending wage theft and recovering stolen wages.”

Finding some workers earned less than $5/hour, the commissioner issued citations of $590,689 for minimum wages, contract wages, meal and rest periods, and waiting time penalties, and $342,765 in interest for employees. The assessments also include $386,996 in civil penalties for minimum wage, pay period, paystub, and meal and rest break violations as well as so-called liquidated damages, a doubling of the minimum wage underpayment.

Notably, under California Labor Code 558.1 business owners, directors, officers, or managers can be held personally liable for such wage and hour violations.  If the company cannot pay a full assessment, the Labor Commissioner can thus go after the personal assets of such individuals.

Take away: Employers should take regular care to confirm and ensure wage and hour compliance before the government comes knocking.  That knock may well require a company to open many doors for inspection.  South Coast Gymnastics’ wide-ranging and potentially “business-busting” audit arose out of a seemingly limited check on COVID precautions measures.

See also,

• Cautionary Tales Episode 36: Is Gig up for Car Wash Company? – First AB 5 Suit Challenging Independent Contractor Classification (July 31, 2020)
• Cautionary Tales Episode 31: Residential Care Facility Not Feeling the Love – 708,521 Reasons to Pay Workers Legally (July 12, 2019)
• Cautionary Tales Episode 27: Walmart Hit with Six Million Dollar Verdict for “Discouraging” Off-Site Meal Breaks (May 23, 2019)

For further information, please contact Tim Bowles, Cindy Bamforth or Helena Kobrin.

Helena Kobrin
April 8, 2021