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December 2010

California Supreme Court Increases the Statute of Limitations for Waiting Time Penalties to Three Years

The California Supreme Court recently issued an Opinion concerning two major issues involving waiting time penalties in the case of Pineda v. Bank of America (Cal. Nov. 18, 2010). The Supreme Court's Opinion increases the potential exposure for employers by increasing the statute of limitations for waiting time penalties from a one-year to a three-year period. This new three-year period will impact all currently pending and future wage and hour claims and class actions. 

In Pineda, the Supreme Court addressed two critical questions involving waiting time penalties. First, does a different statute of limitations apply when an employee seeks to recover only penalties (i.e., one-year period) because his or her wages were paid – albeit belatedly – as opposed to when an employee seeks both final wages and penalties (i.e., three-year period)? Second, are Labor Code section 203 waiting time penalties recoverable as restitution under California's Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.)? The Supreme Court unanimously answered both questions with a resounding "No."

The crux of the statute of limitations issue was whether to use the one-year statute of limitations period for penalties or the three-year statute of limitations period for wages. The Court concluded that "section 203(b) contains a single, three-year limitations period governing all actions for section 203 penalties, irrespective of whether an employee's claim for penalties is accompanied by a claim for unpaid final wages."

In a minor victory for employers, the Supreme Court decided the second issue by holding that Labor Code section 203 penalties may not be recovered as "restitution" under the Unfair Competition Law because employees have no vested ownership interest in the funds. Thus, the Court did not extend the statute of limitations to four years, which applies under the Unfair Competition Law. 

Ultimately, this decision highlights the importance of an employer's final pay practices after an employee leaves a company to eliminate exposure to potential wage and hour claims and class actions.

Please click here to read the Opinion.

Employment Law

Employment Law