On August 21, 2025, the California Supreme Employee issued an opinion in Iloff v. Lapaille, 18 Cal.5th 551 (Cal. 2025) clarifying what constitutes “good faith” for purposes of reducing or eliminating liquidated damages in minimum wage cases.
In Iloff, the plaintiff Laurance Iloff brought California Labor Code claims before the Labor Commissioner against his former employers. Iloff had lived and worked on the defendants’ property, performing maintenance work in exchange for free rent. The Labor Commissioner found that the arrangement violated California’s minimum wage laws and awarded the plaintiff unpaid wages and liquidated damages. The defendants appealed, asserting that they had acted in “good faith” and therefore should not be required to pay liquidated damages.
Under California Labor Code § 1194.2(a), an employee who is not paid the minimum wage is entitled to liquidated damages “in an amount equal to the wages unlawfully unpaid and interest thereon.” However, subsection (b) provides a limited “good faith” defense that may reduce or eliminate these liquidated damages if the employer “had reasonable grounds for believing that the act or omission was not a violation.”
The question before the Court was whether an employer can rely on a “good faith” defense when the employer never made a reasonable attempt to determine the legal requirements for paying minimum wage. The defendants admitted that Iloff received no cash wages, but claimed they did not know that providing free rent alone instead of wages was unlawful.
The Court rejected this argument, holding that “ignorance of the law is insufficient” to establish good faith. Because the employers failed to make any effort to learn whether their arrangement complied with wage laws, they lacked reasonable grounds for believing they were acting lawfully. As a result, the Court upheld the Labor Commissioner’s award of liquidated damages.
This decision reinforces that California employers have an affirmative duty to understand and comply with minimum wage requirements. Employers must ensure that all workers, whether paid hourly, salaried, or otherwise compensated, receive at least the applicable minimum wage for every hour worked. Failure to do so, even out of misunderstanding or neglect, will not excuse liability for liquidated damages.
Click here to read the California Supreme Court’s decision in Iloff v. Lapaille.
If you have questions about minimum wage laws, call 916-612-0326 or email ([email protected]) Finley Employment Law today. Finley Employment Law serves clients throughout California, including Sacramento, Roseville, Davis, Folsom, and Elk Grove.
The information in this blog post is for general informational and advertising purposes only and is not, nor is it intended to be, legal advice. Instead, you should speak with a California employment attorney for advice regarding your individual situation.