United States: California Supreme Court Says Retiring Employees Must Be Paid Promptly

Seyfarth Synopsis:Under Labor Code section 202, California employers must pay all wages to an employee who "quits" within 72 hours, unless the employee has given 72 hours' notice of the intent to quit, in which case the wages are due at the time the employee quits. Employers that fail to pay timely are subject to waiting-time penalties (up to 30 working days of wages) under Labor Code section 203.

In McLean v. State of California, the California Supreme Court has addressed whether an employee who "retires" is an employee who "quits." McLean holds that employees who retire qualify as employees who quit and thus are entitled to prompt payment of termination wages under Section 202.

The Facts

Janis McClean worked for the California Department of Justice as a deputy attorney general. On November 16, 2010, she retired from state employment. That was also her last day of work.

Shortly after her retirement, she sued for a violation of Section 202. She alleged that California did not pay all her wages owed upon her last day of employment or within 72 hours of her last day. She also claimed that the State did not deposit her unused vacation time into her retirement plans and did not transfer her previously deferred wages to her. McClean sought to represent "all employees employed by the State of California who resigned or retired from their employment."

The State, in a demurrer, argued that Section 202 does not apply to employees who "retire" as opposed to employees who "quit." The trial court sustained the demurrer without leave to amend and McLean appealed.

The Court of Appeal reversed and held that employees who "retire" are employees who have quit their employment for purposes of Section 202. The State successfully petitioned for review to the California Supreme Court.

The Supreme Court Decision

The California Supreme Court unanimously affirmed the Court of Appeal. The Supreme Court held that an employee who "retires" is an employee who "quits." Although the decision does not specifically address the 72-hour rule, the Supreme Court appears to assume that a retiring employee will provide such notice. As a result, employers who do not pay retiring employees all wages owed upon termination can be subject to waiting-time penalties under Section 203. The Supreme Court gave several reasons to support this interpretation.

First, a court must interpret Labor Code provisions in favor of protecting the employee. Because the Labor Code and the DLSE regulations do not define the term "quit," a court must consider the ordinary meaning of the word. Under the dictionary definition, to "quit" is "to stop doing a thing; to cease" and, in the employment context, "to leave one's employment." With this definition in mind, the Supreme Court concluded that a retiring employee is one who is quitting.

The State resisted that interpretation by arguing that the term "retire" means something more than "quit," because retirement connotes that the employee will not work again. The Supreme Court rejected that argument, as the term "quit" encompasses any employee who is making a voluntary departure, regardless of the employee's motivation.

The Supreme Court confirmed its interpretation by reviewing the legislative purpose of Section 202. Section 202, which discusses payment deadlines for employees who quit, aims to promote prompt payment of wages on termination. The Supreme Court's interpretation was consistent with that purpose. Section 202 does not suggest any intent to create a category of employees—retirees—who would be exempt from the purpose of promoting prompt payment of wages due upon termination.

The State made other arguments against this interpretation, mainly geared towards amendments to the Labor Code discussing how to pay certain wages to State employees. The State argued that the Legislature, by including special deferred payment rules in Section 202(c) that apply "when an employee quits, retires, or disability retires," indicated a distinction between retirement and quitting.

The Supreme Court rejected this argument for a number of reasons. First, the Supreme Court said that the Legislature, instead of excluding retirees from the definition of quitting employees, may have simply intended to remove any doubt that state governmental retirees may elect to defer certain qualifying payments (accrued leave), consistent with Section 202(c). Next, the Supreme Court reasoned that including the language referenced by the State actually supported the conclusion that retirees are employees who "quit," in that the amendments referenced by the State intended to clarify how the prompt-payment provisions applied to state governmental employees and to provide guidance on how to pay particular kinds of wages that are specific to those employees. Lastly, the Supreme Court again referred to the purposes of the prompt-payment provisions: timely payment of wages to employees is indispensable to the public welfare.

What McLean Means For Employers

While arising in the context of public employment, McLean is not limited to government employers. While McClean's result may have seemed apparent (a retiring employee, quite obviously, is an employee who is quitting employment), McClean's holding provides an important reminder for all California employers. Employers should have in place a process that ensures prompt payment of final wages (including accrued but unused vacation pay) to all terminating employees, whether they are dismissed, they quit, or they retire. Failure to comply with the rules governing prompt payment of all wages due upon termination can result in the imposition of stiff penalties.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.