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Suastez v. Plastic Dress-Up Co. - 31 Cal. 3d 774, 183 Cal. Rptr. 846, 647 P.2d 122 (1982)

Rule:

The right to a paid vacation, when offered in an employer's policy or contract of employment, constitutes deferred wages for services rendered. Case law from California and other states, as well as principles of equity and justice, compel the conclusion that a proportionate right to a paid vacation "vests" as the labor is rendered. Once vested, the right is protected from forfeiture by Cal. Lab. Code § 227.3. On termination of employment, therefore, the statute requires that an employee be paid in wages for a pro rata share of his vacation pay.

Facts:

Francisco Suastez, respondent, was employed by the appellant, Plastic Dress-Up Co. (hereinafter, “Plastic Dress-Up”), from October 16, 1972, until July 20, 1978. Throughout this time, and in accordance with its regular policy, the company paid Suastez weekly wages based on his hourly wage. Additionally, it provided certain fringe benefits, including holiday and vacation pay. The company's vacation policy provided that each employee was entitled to between one and four weeks of paid vacation annually, depending on the length of his or her employment, and that an employee does not become eligible for a paid vacation until the anniversary of his or her employment. Thus, Plastic Dress-Up customarily refused to pay vacation benefits to anyone whose employment was terminated before that anniversary date. After six years of employment, and before his anniversary date, Saustez’s employment was terminated by Platid Dress-Up; the said company refused to pay any pro-rata vacation benefits. Suastez then filed suit in the Los Angeles County Superior Court seeking damages, costs and a declaration that the company's refusal to pay him a pro rata share of his vacation pay violated Cal. Lab. Code § 227.3. The trial court held that that Section 227.3 required the company to pay Suastez the vacation pay due him "on the basis of time served." Plastic Dress-Up appealed the decision.

Issue:

Notwithstanding the company policy that no pro rata vacation benefits will be paid if an employee is terminated before the anniversary of his employment, was plaintiff terminated employee Suastez entitled to pro rata vacation benefits pursuant to California Labor Code Section 227.3?

Answer:

Yes.

Conclusion:

The Supreme Court of California found that plaintiff Suastez was entitled to a pro rata share of his vacation pay after defendant Plastic Dress-Up terminated his employment. According to the Court, Suastez’s right to a paid vacation, when offered in Plastic Dress-Up’s policy or contract of employment, constituted deferred wages for services rendered. Furthermore, the Court concluded that Suastez’s proportionate right to a paid vacation vested as the labor was rendered and was protected from forfeiture by § 227.3.

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