The state Labor Code’s
requirement that employers pay wages immediately on an employee’s termination doesn’t
just apply to workers who are fired or laid off but also includes those who
have completed a short assignment or the time period they were hired for, the California
Supreme Court has ruled. We’ll explain the new ruling and how it impacts your
pay practices.
Model for a Day
Amanza Smith was working
as a salesperson in a
boutique when a representative of cosmetics company L’Oréal USA, Inc.,
approached her, asking her to be a hair model at a show featuring L’Oréal
products. L’Oréal agreed to pay her $500 for one day’s work.
At the show, Smith sat
on a stage as her hair was colored and styled and walked the runway several times.
She stayed until she was told she could leave. Following the show, L’Oréal took
more than two months to pay Smith the $500.
Wage-Payment Lawsuit
Erupts
Smith filed a lawsuit
against L’Oréal on behalf of herself and other hair models. She charged that
L’Oréal violated Labor Code Section 201, which requires an employer that
discharges an employee to immediately pay the wages earned. Smith sought
penalties under Labor Code Section 203, which imposes “waiting time penalties”
of up to 30 days’ pay when an employer willfully fails to pay a discharged
employee in a timely manner. Smith claimed she was owed waiting time penalties
of $15,000 for 30 days at a rate of $500 a day.
L’Oréal asked the court
to dismiss the suit. The company argued that the requirements of sections 201
and 203 weren’t triggered because Smith wasn’t discharged. Rather, L’Oréal
asserted, Smith’s one-day, fixed term of employment merely ended. An appeals
court sided with L’Oréal and threw out the case.
Protections for Workers
The California Supreme
Court has now ruled that for purposes of sections 201 and 203, an employer
discharges an employee not only when the employee is fired, “but also when it
releases an employee upon the employee’s completion of the particular job
assignment or time duration for which he or she was hired.”1
The court explained that
public policy favors the full and prompt payment of wages for all workers. With
that, and with the history of the Labor Code wage payment provisions in mind,
the court said the term “discharge” as used in sections 201 and 203 was
intended to have a broad meaning.
The court pointed out
that excluding employees like Smith from the protective scope of sections 201
and 203 would conflict with this public policy, as employees who fulfill their
employment obligations by completing the specific assignment or duration they
were hired for “would be exposed to economic vulnerability from delayed wage
payment, while at the same time employees who are fired for cause would be
entitled to immediate payment of their wages.” What’s more, a contrary
conclusion would lead to the unfair result that employees who quit have more
protection than employees whose term of employment ends. That’s because another
Labor Code section gives employers just 72 hours to pay workers who quit.
Smith’s case will now
return to the lower court, which will decide whether L’Oréal willfully failed
to pay the wages such that waiting time penalties are warranted.
Join us this fall in San Francisco for the California Employment Law Update conference, a 3-day event that will teach you everything you need to know about new laws and regulations, and your compliance obligations, for the year ahead—it’s one-stop shopping at its best.
Wage-Payment Timeline
Many employers will now
have to shift their pay practices for day laborers and other short-term
employees. Thus, it’s important to review your procedures to ensure you can
meet your wage-payment obligations for these workers.
Here’s an overview of
the rules for final paychecks in discharge and other situations:
• Discharge. A
discharged employee’s earned wages (including accrued vacation) are due
immediately. As the new case underscores, this obligation applies whether the
employee is fired or is leaving either because a fixed term of employment has
come to an end or because the employee has completed the project for which he
or she was hired. Note that special rules apply for final paychecks for motion picture,
oil drilling, and state employees, as well as for layoffs of certain seasonal
employees.
• Quit. Wages and
accrued vacation for an employee who quits or resigns must be paid within 72
hours. However, if the employee gives 72 hours’ prior notice of the intent to
quit, the wages are due at termination.
• Place of payment. Discharged
employees must be paid at the place of discharge. Employees who quit must be
paid at the office or agency of the employer in the county where the employee
worked. However, an employee who quits without providing 72 hours’ notice can
request payment by mail. In that case, the date of mailing is considered the
payment date for purposes of meeting the 72-hour requirement.
• Penalty. To
calculate the waiting-time penalty, an employee’s wages continue to accrue for
every day payment is late. Penalties accrue not only on days the employee might
have worked but also on non-workdays, up to 30 days.
_
1 Smith v. Superior Court
(L’Oréal
S129476, 2006