California Supreme Court Extends Statute of Limitations for Late Wage Penalties -- Pineda v. Bank of America

Labor Code section 201(a) requires employers to pay final wages "immediately" upon terminating an employee.  Labor Code section 203, in turn, adds "teeth" to this requirement by imposing a "waiting time" formula that continues the unpaid wages for up to 30 days while they remain unpaid.  (In addition, Labor Code section 208 provides that "Every employee who is discharged shall be paid at the place of discharge.")

Employers -- especially out-of-state employers doing business in California -- will sometimes implement policies that result in the systematic late payment of final wages.  These policies may include waiting until the next regular payday to cut a final paycheck, or issuing final paychecks by mail from a central payroll location so that the checks are not received until days or weeks after termination.  

This type of systemic late payment may not trigger a very large late penalty for any single employee but the cumulative liability across an entire work force can be huge.  As a result, such late payment policies are a prime target for class action litigation.       

In Pineda v. Bank America, the California Supreme Court gave a boost to such class actions by holding that late penalties under Section 203 can be collected for up to three years after the underlying final wages were paid.  Prior caselaw had applied a one-year statute of limitations.  So Pineda effectively triples the class-wide exposure of employers.

In light of Pineda, employers may want to reexamine their procedures for generating final paychecks.  On the other hand, their former employees may want to take a trip down memory lane to think back about when they received their final pay at their various jobs over the past three years.      

 

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