California requires prompt payment of final wages to retirees

The California Labor Code’s mandate that an employer must make prompt payment of the final wages owed to an employee who “quits,” or else pay statutory penalties, also applies to persons who “retire” from their employment, ruled the California Supreme Court in a unanimous decision. While this putative class action lawsuit was brought by a state employee, the high court’s interpretation of the Labor Code’s prompt payment provisions has application to employers in the private sector too.

Civil penalties sought. The suit was filed by a former California deputy attorney general who alleged that when she retired in 2010, the State of California failed to comply with Labor Code section 202, which requires speedy payment of wages to “an employee not having a written contract for a definite period [who] quits his or her employment.” She alleged that the state failed to pay her final wages on her last day of employment, and also failed to deposit compensation for her unused leave and vacation time to her supplemental retirement plans within 45 days of her last day of her employment, despite her request that they do so. She sought civil penalties under Labor Code section 203, which imposes so-called waiting-time penalties of up to 30 days’ wages on an employer who “willfully fails to pay” final wages to an employee “who quits.” She also asserted a class claim on behalf of similarly situated state employees.

The state countered that because the employee had “retired” from her job, she did not state a claim for statutory penalties under section 203, which applies only to employees who “quit” (or are discharged). Persuaded by this argument, a state trial court sustained the state’s demurrer. An appeals court reversed, and the matter went up to the state high court.

Dictionary definition. The question was one of statutory construction. Because the Labor Code does not define the term “quit,” and Department of Industrial Relations regulations provide “no relevant interpretive guidance,” the California high court began by looking in Webster’s Dictionary—one from 1934, which was close in time to when the Labor Code provisions in question were originally enacted. Webster’s defined “quit” to mean “to leave one’s employment”—a definition that, the high court noted, “easily encompasses withdrawal from employment for the purpose of retiring.”

True, “the word “retire” generally connotes permanent withdrawal from gainful employment—a connotation not shared by the word “quit,” ” the court observed. “But the ordinary meaning of the word “quit” is broad enough to encompass a voluntary departure from a particular employment, whatever its motivation.”

Legislative purpose. Moreover, this construction of the word “quit” accords with the Labor Code provisions” apparent underlying purpose, which was to ensure that employers expeditiously pay final wages to employees who “quit” or are discharged, and this same statutory policy favored prompt payment of wages “to employees who retire, as well as those who quit for other reasons.” The statute “contains no suggestion that the Legislature intended to create a third category consisting of employees whose employment is terminated by retirement, who would be specially disqualified from seeking prompt payment of final wages.”

Opposing this interpretation, the state pointed to the language of the 2002 amendments, which arguably distinguished between quitting a job and retiring. But the court was not convinced by the state’s reading of the statutory language. “In sum,” the high court wrote, “sections 202 and 203 apply to persons who retire from their employment, just as they apply to those who voluntarily leave their employment for other reasons.”

The unanimous court went on to hold that the deputy attorney general could properly sue the state of California as a whole, rejecting the argument that she should have brought her suit against the Department of Justice. (McLean v. State of California, Case No. S221554., August 18, 2016, Kruger, L.)

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