SAN FRANCISCO - The California Supreme Court unanimously
ruled Nov. 18 that statutory penalties for unpaid wages are not recoverable as
restitution under the state's unfair competition law (UCL), Business and
Professions Code Section 17200 (Jorge A. Pineda v. Bank of America, No.
S170758, Calif. Sup.; See September 2009, Page 4).
Jorge Pineda sued his former employer, Bank of America,
in the San Francisco County Superior Court in October 2007. Pineda
alleged that despite providing two weeks' notice of his May 11, 2006,
resignation, the bank did not issue his final pay until May 15, 2006.
Pineda alleged that the conduct violated the Section 17200 and sought
restitution of unpaid continuation wages under California Labor Code Section
Bank of America obtained summary judgment on the ground
that the California Labor Code's one-year statute of limitations barred the
action. The court also found that the UCL claim failed because the Labor
Code's remedy for failure to pay timely wages was a penalty and thus not
recoverable under the UCL. Pineda appealed.
A First District Court of Appeal panel held that the
continuation wage remedy imposed under Section 203 is a penalty for an
employer's failure to timely pay earned wages, not compensation for the
employee's labor. As a penalty, it is not recoverable under the UCL, the
The California Supreme Court accepted Pineda's appeal on
the issue of the statute of limitations under Section 203 and whether
continuation wages are recoverable under the UCL.
The Supreme Court ruled that a different statute of
limitations does not apply when an employee seeks to recover only Section 203
penalties as opposed to when an employee seeks final wages and penalties.
"Section 203(b) sets forth a single limitations period governing all actions to
recover section 203 penalties regardless of whether an employee seeks both
unpaid wages and penalties or penalties alone," the court held.
The high court disapproved of the Fourth District Court
of Appeal decision on Section 203 penalties in McCoy v. Superior Court
( 157 Cal. App. 225, 229-230), which the First District cited in its Pineda
The Supreme Court agreed with the First District court
that Section 17200 does not apply to Pineda's claims: "[S]ection 203
penalties are not recoverable as restitution under the UCL because employees
have no ownership interest in the funds," the court said.
"Section 203 is not designed to compensate employees for
work performed," the court continued. "Instead, it is intended to
encourage employers to pay final wages on time, and to punish employers who
fail to do so."
"The vested interest in unpaid wages, on the other hand,
arises out of the employees' action, i.e., their labor," the court
said. "Until awarded by a relevant body, employees have no comparable
vested interest in section 203 penalties. We thus hold section 203
penalties cannot be recovered as restitution under the UCL."
[Editor's Note: Full coverage will be in the
November issue. In the meantime, the opinion is available at www.mealeysonline.com or
by calling the Customer Support Department at 1-800-833-9844. Document
#58-101123-033Z. For all of your legal news needs, please visit www.lexisnexis.com/mealeys.]
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