California Supreme Court Decision Is A Mixed Bag For Employers

Labor Code section 203(a) provides that “[i]f an employer willfully fails to pay, without abatement or reduction . . . any wages of an employee who is discharged or who quits, the wages of the employee shall continue as a penalty from the due date thereof at the same rate until paid or until an action therefore is commenced; but the wages shall not continue for more than 30 days.”  Labor Codesection 203(b) provides that “[s]uit may be filed for these penalties at any time before the expiration of the statute of limitations on an action for the wages from which the penalties arise.”

In Pineda v. Bank of America, N.A., the California Supreme Courtresolved two issues associated with Labor Code section 203 “waiting time” penalties:  (1) Does a one-year or a three-year statute of limitations apply when an employee is suing to recover only “waiting time” penalties (i.e., when an employee was paid all of his or her wages but the employer did not timely pay the wages)?  (2)  Can “waiting time” penalties be recovered as “restitution” under Business and Professions Code section 17200, et seq., which is subject to a four year statute of limitations?  The California Supreme Court states the answer to both questions is “no.”

As to the question of whether a suit to recover only “waiting time” penalties is subject to a one-year or to a three-year statute of limitations, the court determine that a three-year statute of limitations applies to claims for “waiting time” penalties regardless of whether the employee(s) seeking those penalties are seeking only those penalties or those penalties and the underlying allegedly unpaid wages.  In so holding, the court disapproved the Court of Appeal’s decision in McCoy v. Superior Court (2007) 157 Cal.App.4th 225 holding that a claim for “waiting time” penalties only is subject to a one-year statute of limitations.”

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