Seyfarth Shaw LLP | www.seyfarth.com Litigating CA Wage & Hour and Labor Code Class Actions (22nd Edition) 51 practice allow sufficient opportunity for empoyees to take time off, or work fewer hours in lieu of taking time off; and (4) be administered fairly so that it neither becomes a de facto “use it or lose it policy” nor results in inequities (e.g., where one employee works many hours, taking minimum time off, and another works fewer hours and takes more time off).282 A policy with these characteristics would not trigger Section 227.3 and require payment of unused vacation wages at termination. After McPherson, there remain many unknowns about the proper structuring of unlimited vacation plans and employers should proceed with caution. IX. Waiting Time Penalties A. Generally Many class actions assert, on behalf of former employees, claims for “waiting time penalties“ under Labor Code section 203.283 Under California law, all wages due must be paid at the time of termination, unless the employee quits without notice, and then within seventy-two hours of termination.284 When a former employee’s wages are not timely paid, the employee’s wages continue, as a penalty: (i) while the former employee waits to get paid; (ii) until an action is commenced;285 or (iii) up to thirty days, whichever period is shorter. Thirty days of penalties means thirty consecutive paid days, including Saturdays, Sundays and holidays (typically equivalent to six weeks of pay), rather than simply one month’s pay. Each calendar day that passes before the employer pays all wages owed triggers an additional day of penalties at the employee’s regular daily rate, even if the employee is not normally scheduled to work on all of these days.286 (Where such penalties are grossly out of proportion to the unpaid wages upon which they are based, however, they could be found to violate due process under the U.S. Constitution).287 Courts have interpreted Section 203’s “until an action is commenced” language to mean the filing of a complaint with a state or federal court.288 282 Id. 283 The statute of limitations period on Lab. Code § 203 claims is three years, regardless of whether only penalties are sought or whether underlying wages are also sought in same action. Pineda v. Bank of America, 50 Cal. 4th 1389, 1401 (2010), overruling McCoy v. Superior Court, 157 Cal. App. 4th 225, 233 (2008). 284 Lab. Code § 203. 285 While many other types of penalties continue to accrue during the pendency of a lawsuit, waiting time penalties are cut off once a complaint is filed. Defendants should not overlook this limitation, as it can make a substantial difference in potential exposure in connection with class actions. 286 Mamika v. Barka, 68 Cal. App. 4th 487 (1998). 287 See, e.g., Hale v. Morgan, 22 Cal. 3d 388, 405 (1978) (statutory penalties disproportionate to the underlying injury deprived the defendant of due process and were “constitutionally excessive”). 288 Triad Data Servs., Inc. v. Jackson, 153 Cal. App. 3d Supp. 1, 12–13 (1984); disapproved of on other grounds by Smith v. Rae-Venter Law Grp., 29 Cal. 4th 345 (2002).
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