Plaintiff-side employment lawyers often leverage an unusual part of California law, “waiting-time penalties,” which allows employees to recover 30 times an average day's wages for failure to pay any amount of wages due upon termination. Unpaid wages could include hourly pay, overtime premiums, or even unused vacation. The penalties accrue under Labor Code section 203, which can be viewed here.
These penalties can be remarkable. Common examples might include claims by a former employee not paid for a single one-hour training meeting. Such a claim might seek $15.00 for unpaid wages (one hour) but $3600.00 in penalties - 240 times the alleged lost wages. Courts have no discretion to reduce the penalty when due.
The penalty applies only when failure to pay is ‘willful,’ namely where there is no good-faith dispute as to whether wages are owed.
Some courts and the state Labor Commissioner have taken a sweeping view of ‘willful’ conduct, finding that – in almost all cases – even an honest dispute over an employee’s status (such as whether an employee should have been classified as hourly rather than overtime-exempt) counts as ‘willful’ failure to pay.
The federal Ninth Circuit Court of Appeals just dealt a serious blow to this broad interpretation of ‘willful.’ (And in doing so, the court dealt an even greater blow to an issue discussed earlier in this blog: serial claims by freelancers such as the plaintiff, actor/model Bijon Hill, who sued companies after completing assignments even when they had been fully paid. In one case, despite admitting she had already been paid the $2,000.00 agreed rate, Ms. Hill sought $60,000.00 in penalties following a single-day photo shoot.)
The court held that, while there was evidence of some control over the plaintiff’s activity, various other factors supported a reasonable argument for independent contractor status such as the parties’ agreement, lack of a W-2, work done by the plaintiff for other clients, and the fact that modeling was not a regular part of the defendant’s business.
This decision was made under the state’s common-law independent contractor standard (the "Borello" test) but may easily apply to other issues such as whether an individual falls outside the state’s recent Dynamex standard or whether an employee was properly classified as exempt from overtime.
Time will tell how this case is treated by California state courts, which are not bound by the federal appellate holding. It is nonetheless a welcome win for employers and meaningful progress against unreasonable interpretation of California employment standards.