Photo by Annie Spratt on Unsplash
“I quit.”
These words from an employee leads to a string of questions from an employer.
What do I need to pay the employee?
How quickly do I have to do it?
Can I wait until the next batch of payroll checks are processed?
Do I have to cut the employee a separate check?
What happens if I do it wrong?
These are all legitimate questions because the laws in California are very specific about what an employer must do and the penalties for failing to do it correctly in the eyes of the law.
A recent appellate opinion (Nishiki v. Danko Meredith, APC) is a great example of how a small inconsistency in the final paycheck that ultimately meant the employee is owed only $2,250 in penalties, resulted in the employer having to pay over $86,000 to the former employee in attorney’s fees.
That’s 3,822% of the penalty itself.
The inconsistent final pay check
What happened in Nishiki could have happened to any one of us. In this case, plaintiff, who worked as a paralegal at the defendant law firm emailed her resignation to the employer’s bookkeeper at 6:38 p.m. on Friday, November 14, 2014. The bookkeeper sent the notice of resignation to the firm owners on Saturday morning. Defendant mailed her a handwritten check on Tuesday, November 18. Although the numerical part of the check had the correct amount owed to the employee, the handwritten portion omitted the word “eighty” dollars, thereby making the check $80 short. The inconsistency resulted in plaintiff’s bank refusing to deposit the check.
Plaintiff notified her former employer on November 26th that she couldn’t deposit the check. There was some back and forth before the defendant finally sent out a replacement check on December 5th, nine days later.
Labor Commissioner Awarded $4,250 in Waiting Time Penalties
Plaintiff filed a wage claim with the labor commissioner seeking violations of various wage and hour laws, most of which the labor commissioner decided were unsupported. However, the labor commissioner did award the plaintiff $4,250 in waiting time penalties. This represented her daily rate of pay at $250 per day multiplied by the 17 days it took her to receive the check with the correct amount (from November 18, 2014 to December 5, 2014).
Defendant Appealed (Twice)
Instead of paying the $4,250 award, Defendant appealed to the Superior Court, which affirmed the $4,250 award for waiting time penalties. Additionally, the court granted Plaintiff’s motion for an award of statutory attorney’s fees in the amount of $86,160.
Defendant then appealed to the California Court of Appeal.
The Court of appeal did reduce the waiting time penalties by $2,000 because it found that the inconsistency between the numerical and written portions of the initial check was merely a clerical error and not a “willful” failure to pay wages. Unfortunately, the Court of Appeal held that the employer should have immediately replaced the check or send another check for $80 when it received notice of the inconsistency on November 26th, rather than make the plaintiff send the check back before sending out a new check on December 5th. That 9-day delay resulted in $2,250 in waiting time penalties. The Court also upheld the $86,160 in attorney’s fees and costs.
As an employer, it is difficult, practically impossible, to do everything perfectly. However, quickly remedying the problem will generally reduce your exposure. Additionally, it is important to understand the full potential exposure of appealing the Labor Commissioner’s Order, Decision or Award, when you may be able to reduce your penalties but not win outright.
Contact me at (949) 529-0007 if you received a wage claim from a current or former employee.
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