230 | 2026 Cal-Peculiarities ©2026 Seyfarth Shaw LLP www.seyfarth.com that no wages are owed is a defense,171 but ignorance of the law or mistakes in calculation generally are not defenses to waiting time penalties claims.172 (See § 13.3.) Although penalties most obviously apply to failures to pay timely for work done during the final pay period, the DLSE and courts have also applied the penalty where the final paycheck fails to cover wages earned at any time during employment. Absent some constitutionally imposed limitation,173 the amount of the waiting-time penalty does not depend on the amount of wages unpaid at the time of termination. Thus, an employer who has underpaid an employee by a grand total of $1, and who does not discover the underpayment until more than 30 working days after the employee has quit, could owe the employee penalties, measured by 30 working days, or six weeks, of wages. The Court of Appeal has held that trial judges lack discretion to reduce the amount of waiting-time penalties.174 A trial judge can effectively reduce the amount of penalty, however, by finding that part of the delay in payment resulted from inadvertent clerical error and thus was not willful.175 To make matters still worse for employers, the limitations period for claiming waiting-time penalties is three years, not the one-year period generally applying to penalty claims. One Court of Appeal decision held that a claim for penalties based only on the late payment of final wages (where the employer had already paid the underlying wages due) should be subject to the one-year statute of limitations,176 but the California Supreme Court held that a three-year period applies instead.177 Softening the blow somewhat, the same California Supreme Court decision held that waiting-time penalties are not recoverable as restitution under California’s Unfair Competition Law,178 in that those penalties “would not restore the status quo by returning to the plaintiff funds in which he or she has an ownership interest.”179 Accordingly, plaintiffs seeking waiting-time penalties cannot use a UCL claim to extend the limitations period to four years. However, an employee asserting a claim under Labor Code section 203 is also entitled to seek recovery of attorney fees.180 The Office of the Chief Counsel of the IRS has opined on the tax treatment of this California peculiarity, stating that section 203 penalties are not wages for purposes of employment tax. According to this opinion, an employer paying section 203 penalties need not withhold taxes for the terminated employee or pay employer-side payroll taxes.181 7.6 “White Collar” Exemptions from Wage Requirements Section 1(A) of most of the Wage Orders states that sections 3 through 12 of the Wage Orders do not apply to employees covered by the executive, administrative, or professional exemptions. Section 1(C) indicates that the same is true for outside salespeople. The California executive, administrative, and professional exemptions resemble the corresponding federal exemptions, but an employer generally will find it harder under California law than under federal law to establish that an employee is exempt. For one thing, federal wage and hour law is not inherently pro-plaintiff, while California wage and hour law definitely is. A 2018 U.S. Supreme Court decision considered whether service advisors at an auto dealership qualified under an FLSA overtime exemption that applies to salespeople primarily engaged in servicing automobiles. The Ninth Circuit, finding the statutory language ambiguous, had ruled for the plaintiff under a “principle that exemptions to the FLSA should be construed narrowly.”182 The U.S. Supreme Court “reject[ed] this principle as a useful guidepost for interpreting the FLSA. … The narrow-construction principle relies on the flawed premise that the FLSA pursues its remedial purpose at all costs. … But the FLSA … exemptions are as much a
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