Wage Disputes: Time Limit to Recover Waiting-Time Penalties Clarified

A waiting-time penalty
is assessed when an employer willfully fails to pay a worker the compensation
he or she is entitled to on termination of employment. A California appeals court recently ruled that
when a worker seeks waiting-time penalties but not unpaid final wages, his or
her claim is subject to a one-year statute of limitations. This means the employee
must file a lawsuit within one year of the date on which the alleged violation
occurred or on the date when he or she became aware, or should have become
aware, of the violation.


One-Year Time Limit

Derrick McCoy, on behalf
of a class of workers, claimed that Irvine-based Kimco Staffing Services, Inc.,
a temporary staffing agency, did not pay final wages when work assignments were
completed. McCoy did not sue for these underlying wages; instead, he asserted that,
rather than pay wages within 72 hours of receiving a worker’s resignation
notice or discharging the person, as the law requires, the agency paid those wages
on the next scheduled payday.


McCoy claimed that
waiting-time penalties were owed for the four years before he filed suit. Kimco
argued that because waiting-time penalties were not “wages” within the meaning
of the California Labor Code, a four-year statute of limitations did not apply and
a one-year limit applied instead. The trial court agreed with Kimco, and a California appeals court
upheld the ruling, finding that Labor Code Section 203 could apply to
waiting-time penalties but only if the lawsuit also sought unpaid wages.


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1 An employee who sues for
only penalties has just one year to bring the claim, the appeals court


Setting a Compliance
Plan into Action

This case emphasizes how
important it is to ensure that final wages are paid within the correct time
period under California law—and thus avoid waiting-time penalties—so employers
should review their pay practices. Final wages include wages, salary, unused
and accrued vacation and personal time, and commissions. As a rule of thumb,
consider all earned compensation when determining whether something should be
classified as a final wage.


The California
Department of Industrial Relations offers several scenarios that help
illustrate instances in which employees may and may not be entitled to waiting-time
penalties. For example:


1. If an employee gives
72 hours’ notice of his or her resignation and the employer provides the employee
with a final paycheck, including compensation for earned vacation and personal
time, commissions, and other earned wages, within 72 hours of when the person
gave the notice to quit, the employee cannot collect waiting-time penalties.


2. If an employee does
not give 72 hours’ notice before quitting, he or she must return to the place
of employment and demand payment within 72 hours of quitting to invoke the
waiting-time penalty.


3. If an employer pays a
worker for the wages that he or she earned in the final days of employment within
72 hours of the employee’s termination but does not provide him or her with
payment of earned, accrued, and unused vacation time at that time, the employer
will most likely be found liable for a waiting-time violation.


Also, note that where
waiting-time penalties are concerned, the employer’s intent is not important.
As long as the employer knows that the failure has occurred under its control,
and there is evidence that the employer didn’t act, it most likely will be
liable for a wage violation.


For more on waiting-time
penalties, visit www.dir.ca.gov/dlse/FAQ_WaitingTimePenalty.htm.



1 McCoy v. Superior
Court of Orange County (Kimco Staffing Services, Inc.), Calif. Court of Appeals (Dist. 4) No.
G038589, 2007