California resolves limitations periods on waiting time penalties claims
December 9, 2010
Employment Law Alert
California imposes waiting time penalties for an employer’s failure to timely pay wages at the end of employment. In recent years, courts have faced the question of whether the statute of limitations on such claims is one or three years, or possibly four years if waiting time penalties can be pursued under the Unfair Competition Law. In a two-part answer, Pineda v. Bank of America, N.A. has resolved these questions, setting forth a significant ruling.
California imposes waiting time penalties for an employer’s failure to timely pay wages at the end of employment. In recent years, courts have faced the question of whether the statute of limitations on such claims is one or three years, or possibly four years if waiting time penalties can be pursued under the Unfair Competition Law (“UCL”).
In a two-part answer, Pineda v. Bank of America, N.A. has resolved these questions. The California Supreme Court held that the limitations period always is three years. It held that such penalties cannot be recovered under the UCL, eliminating the possibility of a four-year limitations period. While eliminating claims under the UCL, the ruling is significant because it allows pursuing waiting time penalties within a significantly longer period than the one-year period that generally applies to penalty claims.
Labor Code Section 203 provides a three-year statute of limitations
Labor Code section 203 imposes waiting time penalties of one day’s wages for each day, up to 30 days, that an employer willfully fails to pay wages at the end of employment. The law provides that “the wages of the employee shall continue as a penalty.” Pineda did not involve a claim for wages, which already had been paid (although late) by the time of the claim. Instead, the plaintiff sought only waiting time penalties. In these circumstances, the lower courts held that a one-year limitations period applies when a claim seeks waiting time penalties alone.
Under their reasoning, however, a claim seeking wages and waiting time penalties together could be filed within three years. That conclusion was based on the statute’s later provision 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 McCoy v. Superior Court in 2007, another court of appeal drew the same distinction.
The Supreme Court rejected these holdings. Instead, it held that any claim for waiting time penalties may be filed within three years, “irrespective of whether an employee’s claim for penalties is accompanied by a claim for unpaid final wages.” Wage claims may be filed within three years. Although Labor Code section 203 describes waiting time penalties “as a penalty,” the Supreme Court held that the plain language allowing suit for waiting time penalties within the time for a wage suit means that the legislature intended a three-year limitations period always for these penalties. The statute “sets forth a single limitations period governing all actions to recover [waiting time] penalties regardless of whether an employee seeks both unpaid wages and penalties or penalties alone.”
On this point, Pineda is significant. It settles that statute of limitations question on waiting time penalties as three years in all cases. Since McCoy, some employers and courts relied on a one-year statute of limitations for waiting time penalties claims when all wages had been paid. Now, even though all wages have been paid and even if there is no wage claim alleged, an employee has three years to pursue a waiting time penalties claim. This holding may be significant in individual and class action claims.
No waiting time penalties under the UCL
While giving a longer statute of limitations on one hand, the Supreme Court also limited this period on the other hand. Pineda also involved a claim under the UCL, seeking to recover waiting time penalties as restitution. The UCL allows recovery of restitution for acts amounting to unfair competition or business practices, including violations of other laws. The UCL has a four-year statute of limitations.
Claims for waiting time penalties under the UCL, seeking a longer limitations period, have been common in wage and hour class actions. The Supreme Court’s decision ended such claims. It held that, as penalties, waiting time penalties cannot be recovered under the UCL because they are punitive rather than restitutionary. As a result, waiting time penalties may be pursued only through a claim under the Labor Code, with a three-year limitations period.
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