McLean v. State of CA: Prompt Payment of Final Wages Required for Employees Who Retire

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On August 18, 2016, the California Supreme Court unanimously held that the statutory provisions requiring the prompt payment of final wages apply not only to employees who quit their employment, but also employees who retire. McLean v. State of California, et al., No. S221554 (Cal. Aug. 18, 2016) (slip op. available here). The court rejected arguments suggesting that the Legislature intended to exclude employees whose employment is terminated by retirement from seeking prompt payment of final wages.

In McLean, the plaintiff Janis S. McLean, a retired deputy attorney general, sued the State of California and the State Controller’s Office on behalf of herself and a class of former state employees who had resigned or retired and did not receive their final wages within the time periods set forth in the prompt payment provisions of Labor Code sections 202 and 203. Section 202 applies to employees who have no written contracts for a definite period and generally provides that when such employees quit their employment, their wages shall be paid within 72 hours. Section 203 requires employers to pay waiting time penalties of up to 30 days’ wages if they willfully fail to pay wages of their employees who are discharged or quit.

The plaintiff in McLean alleged that the defendants violated section 202 by failing to pay her final wages on her last day of employment or within 72 hours after her last day and failed to make full and prompt payment under section 202 to other members of the proposed class. The defendants filed a demurrer, and the trial court sustained the demurrer, finding that because the plaintiff had “retired,” she had not stated a claim for statutory penalties pursuant to section 203, which applies only when an employee “quit[s]” or is “discharged.” Slip op. at 4. The Court of Appeal reversed in part, finding that the statutory provisions apply when an employee “quits to retire.” Id. at 5.

The California Supreme Court granted review and affirmed. The court found that “retirees fall into the broader category of employees who have ‘quit’ their employment within the meaning of the general prompt payment rule of section 202(a) and section 203.” Slip op. at 9. The court found no reason to conclude that retirees would be specially disqualified from seeking prompt payment of final wages and rejected arguments that the Legislature impliedly excluded retirees from the benefit of the long-standing general rule entitling employees to prompt payment of wages upon “quitting” their employment. Id. at 7-9. Sections 202 and 203 thus “apply to persons who retire from their employment, just as they apply to those who voluntarily leave their employment for other reasons.” Id. at 14.

This comports with the purposes of the prompt payment provisions, as “California has long regarded the timely payment of employee wage claims as indispensable to the public welfare.” Smith v. Super. Ct., 39 Cal. 4th 77, 82 (2006). As a result, employers should be mindful to promptly issue final pay to retirees.

Authored By:
Liana Carter, Senior Counsel