Seyfarth Shaw LLP | www.seyfarth.com Litigating CA Wage & Hour Class and PAGA Actions (23rd Edition) 67 penalties under Section 203.”327 Simple ignorance of the law, as opposed to a reasonable, good faith belief that the law provided a defense to payment of wages, generally is insufficient to avoid waiting time penalties.328 B. Application to Fixed-Term and Temporary Employment 1. Assignments for a Fixed Term Section 203 provides that waiting time penalties are recoverable only by an employee “who is discharged or who quits.”329 Courts have broadly interpreted this phrase to include employees who both voluntarily and involuntarily withdraw from their employment.330 Thus, employees who retire are deemed to have “quit” and would be entitled to waiting time penalties for wages not paid on the date of their separation.331 But what happens when a work assignment simply comes to an end by its own terms, either because a fixed term has expired, or a fixed project is completed? The Court of Appeal held that neither circumstance was a “discharge” triggering application of Section 203, but the California Supreme Court reversed. In Smith v. Superior Court,332 the plaintiff worked a one-day assignment as a hair model for L’Oréal, for which she earned $500. The employer, pursuant to its regular practice, did not pay her until sixty days after the model shoot ended.333 If the delayed payments violated Labor Code section 203 as to every hair model L’Oréal paid in a similar fashion in California, potential liability would have amounted to $15,000 per model per assignment (thirty working days of penalty pay times $500 per day), which could quickly add up to millions of dollars. If the end of the assignment was not a “discharge,” however, then the employee would be limited solely to suing for payment of the wages, interest, and any attorney’s fees accrued in bringing the suit.334 The California Supreme Court in Smith ruled that the end of the one-day assignment resulted in a “discharge” of the employee.335 Smith explained that the term “discharge” was ambiguous: it could mean either “fire” or “release pay at wrong rate, but the law was uncertain and employer’s actions were based on a good-faith belief of what the law required, so no waiting time penalties were assessed); Hill v. Wal-Mart, 32 F.4th 811 (9th Cir 2022) (Where employer misclassified employee as independent contractor in good faith, no section 203 waiting time penalties were due). 327 Smith v. Rae-Ventner Law Group, 29 Cal. 4th 345, 354 n.3 (2002), superseded on other grounds by statute, Code Civ. Pro. § 98.2(c) as recognized in Eicher v. Advanced Bus. Integrators, Inc., 151 Cal. App. 4th 1363 (2007); see also Nordstrom Com’n Cases, 186 Cal. App. 4th 576, 584 (2010) (holding that the trial court did not abuse its discretion in discounting the penalties on a Section 203 claim, because the defendant could avoid the penalties by showing that a “good faith dispute” existed regarding the claimed wages); Amaral v. Cintas Corp., 163 Cal. App. 4th 1157, 1201-03 (2008) (defendant’s failure to pay wages according to “living wage” clause in contract did not constitute a willful violation of the Labor Code where the defendant’s position raised “complicated issues of first-impression”). 328 Barnhill v. Robert & Saunders Co., 125 Cal. App. 3d 1, 7 (1981). 329 Lab. Code § 203. In addition, the penalties for employees who quit are limited to employees “not having a written contract for a definite period.” Lab. Code § 202. 330 McLean v. State, 1 Cal. 5th 615, 627 (2016). 331 Id. 332 123 Cal. App. 4th 128 (2004) (single-plaintiff case). 333 The employer erroneously treated its models as independent contractors. If the employer lacked a reasonable basis for that position, that could qualify as a “willful” violation sufficient to trigger waiting time penalties. 334 Lab. Code § 218.5 (attorney’s fees recoverable); Lab. Code § 218.6 (pre-judgment interest recoverable from the date payment was owed). 335 Smith v. Superior Court, 39 Cal.4th 77 (2006).
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