From Owed to Paid: SB 261 Changes the Game on Wages and What Employers Should Know
Q: What is SB 261?
SB 261 amends Labor Code Section 98.2 and adds sections 238.05 and 238.10. The amendment and new sections are designed to strengthen enforcement of final judgments for unpaid wages. It targets situations where employers fail to pay wage judgments after employees or the Labor Commissioner prevail in court or administrative proceedings.
Q: When does SB 261 take effect?
SB 261 went into effect on January 1, 2026.
Q: What problem is SB 261 intended to address?
The Legislature found that many employees who win wage claims never actually receive payment. SB 261 creates significant financial consequences for employers who delay or fail to satisfy final wage judgments.
Q: What happens if an employer does not pay a wage judgment?
If a final judgment for unpaid wages remains unpaid 180 days after the appeal period expires, a court may impose a civil penalty of up to three times the amount of the unpaid judgment, including interest.
This penalty is in addition to the underlying wages, penalties, and interest already owed.
Q: Are attorneys’ fees awarded under SB 261?
Yes. Courts must award reasonable attorneys’ fees and costs to the prevailing party in an action to enforce an unpaid wage judgment. This applies whether the action is brought by:
- The employee,
- The Labor Commissioner, or
- A public prosecutor.
Q: Does SB 261 apply to all employers?
Yes. Any California employer subject to a final judgment for unpaid wages may be affected, regardless of size or industry. Common wage judgments include claims for:
- Unpaid minimum wage or overtime
- Missed meal or rest period premiums
- Unpaid final wages
- Unlawful deductions
- Wage claim awards issued by the Labor Commissioner
Q: Does SB 261 create successor liability?
Yes. Successor employers—including entities that acquire a business through a merger, acquisition, reorganization, or asset transfer—may be held jointly and severally liable for unpaid wage judgments and related penalties.
This makes wage-judgment due diligence critical in business transactions.
Q: Can penalties be avoided if the employer is trying to pay?
Potentially. Employers that pay the judgment in full, or enter into and comply with a documented payment agreement, before the 180-day deadline may reduce exposure. However, informal delays or partial payments without court approval may not prevent penalties.
Q: How are collected penalties distributed?
Civil penalties collected under SB 261 are generally split:
- 50% to affected employees, and
- 50% to the Division of Labor Standards Enforcement (DLSE) to support enforcement efforts.
Q: What should employers do to prepare?
Employers should take proactive steps, including:
- Audit for outstanding wage judgments or pending wage claims likely to result in judgments
- Track appeal deadlines and the 180-day payment window
- Develop a payment or settlement strategy for existing judgments
- Strengthen wage and hour compliance to prevent future claims
- Include wage-judgment diligence in mergers, acquisitions, and restructurings
- Consult counsel early if a wage judgment is issued or anticipated
Q: What is the biggest takeaway for employers?
Under SB 261, failing to pay a wage judgment is no longer just a delay—it is a high-risk compliance violation. The combination of triple penalties, mandatory attorneys’ fees, and successor liability makes prompt resolution of wage judgments essential.
If you have further questions about SB 261, Maynard Nexsen's Labor & Employment law team stands ready to help.
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