Laurance Iloff lived and worked in an unincorporated area of Humboldt County known as Bridgeville, on property owned by Bridgeville Properties, Inc. and managed by Cynthia LaPaille.

Iloff’s employers rented out the property, which includes small houses, cabins, and other structures. For several years, Iloff performed maintenance on Bridgeville’s structures, grounds, and water system, and LaPaille provided him instructions, directions, and approvals in relation to this work. Under an informal arrangement, Iloff’s employers allowed him to live rent-free in one of the houses but did not provide him any other benefits or compensation for his services.

After his employers terminated this arrangement, Iloff filed claims against them with the Labor Commissioner, initiating a process for adjudicating wage claims informally known as “the Berman process.” The employers argued that Iloff was an independent contractor, but the Labor Commissioner determined that he was an employee and as such, was entitled to unpaid wages, liquidated damages, penalties, and interest.

The employers appealed, seeking de novo review of the Labor Commissioner’s ruling in the superior court. In response, Iloff — now represented by an attorney from the Labor Commissioner’s office — filed a notice of claims. In this notice, Iloff reasserted the wage claims he had raised before the Labor Commissioner and added new claims, including a claim for penalties under the Paid Sick Leave law.

Following a bench trial, the superior court found that Iloff was an employee. Applying the framework set out in Dynamex Operations West, Inc. v. Superior Court (2018) 4 Cal.5th 903, the court reasoned that Iloff was properly classified as an employee, rather than an independent contractor, because he was not “free from [the employers’] control and direction” and he performed work that was within the “usual course” of their business. (Id. at p. 964.) The court ruled that Iloff was entitled to unpaid wages, penalties, and interest.

On the two issues addressed by the California Supreme Court in this case, the superior court ruled in favor of the employers. First, the court ruled that Iloff was not entitled to liquidated damages because his employers had acted in “good faith” in not paying him and had “reasonable grounds for believing” they were complying with the law governing minimum wages. (§ 1194.2, subd. (b).) The court based this ruling on its findings that the employers and Iloff intended and expected Iloff to perform his services in exchange for free rent and that neither he nor the employers understood or believed, at any time before his termination, that he would be paid wages or treated as an employee. Second, the court rejected Iloff’s claim for penalties under the Paid Sick Leave law, concluding that the statute did not authorize Iloff to seek those penalties in the context of the employers’ Berman appeal. (§§ 246, subd. (i), 248.5, subds. (a) & (b).)

Iloff appealed, and the Court of Appeal affirmed in part and reversed in part, affirming the trial court’s judgment in the employers’ favor on the liquidated damages and Paid Sick Leave law issues. (Seviour-Iloff v. LaPaille (2022) 80 Cal.App.5th 427, 447–451 (Seviour-Iloff).) The Supreme Court granted review to address these two issues.

This case addresses two issues concerning the rights of California workers whose employers fail to pay them the minimum wage or provide them paid sick leave benefits. The first issue relates to the good faith defense to the default rule that employees who prove minimum wage violations are entitled to liquidated damages. (Labor Code, § 1194.2.) The Supreme Court held that to establish the good faith defense, an employer must show that it made a reasonable attempt to determine the requirements of the law governing minimum wages; proof that the employer was ignorant of the law is insufficient.

The second issue relates to the process for raising claims under the Healthy Workplaces, Healthy Families Act of 2014 (§ 245 et seq.; the “Paid Sick Leave law”). Specifically, we must determine whether a court may consider a Paid Sick Leave law claim that an employee raises in the context of their employer’s appeal to the superior court of a Labor Commissioner ruling. (§ 98.2, subd. (a).) We hold that a court may do so.

The Court of Appeal reached the opposite conclusion on both issues, thus the Supreme Court reversed in the published case of Iloff v. LaPaille – S275848 (August 2025).