SACRAMENTO – Retiring is a form of quitting when it comes to prompt pay protections provided for in California labor laws, the state’s Supreme Court concluded.
The court ruled that prompt pay protections “apply to persons who retire from their employment, just as they apply to those who voluntarily leave their employment for other reasons."
The Supreme Court’s ruling affirms a court of appeals decision in the case of McLean v. state of California, in which the state argued that final pay statues didn’t protect retirees.
The state contended that plaintiff Janis McLean wasn’t entitled to her final wages within 72 hours, per state labor laws, when she retired from her post as deputy attorney general in 2010. The Labor Code’s prompt pay statutes cover employees who “quit” or were “discharged,” but don’t extend to those who “retire,” the state argued.
However, the Supreme Court asserted that the state’s labor codes were meant to protect employees and should be interpreted as such. In weighing the codes’ usage of the term “quit,” the court went with the most common definition of the word: to stop or bring to an end.
The distinction between terminated employees and retirees can help employers determine how final pay is tendered, but the Labor Code’s timing requirement dictates when it’s paid out, according to attorney Josh Rodine, a partner at Seyfarth Shaw.
That’s “at least until the state persuades the legislature to amend the Labor Code,” Rodine told the Northern California Record.
Right now, California employers face heavy penalties for failing to tender final pay to an employee within 72 hours after the person has quit - and that now clearly includes retirement. If the employee gives at least 72 hours' notice of his or her intent to quit, then the employer has to pay up by the final day of employment.
“It goes without saying that the state wanted to avoid liability, and this is why it attempted to distinguish retiring employees from quitting employees,” Rodine said. “But this was particularly the case here given the number of people that could possibly be class members.”
That liability covers more than just final pay. It can cover up to 30 day’s wages, per section 203 of the Labor Code.
“The McLean decision is an important one as it provides clarity around an issue that is likely to impact a significant component of California’s workforce as more and more baby boomers reach retirement age,” Rodine said. “However, the decision comes as little surprise given the plain language of the statute.”
Before reaching the Supreme Court, the state tried to have a previous ruling overturned in the 3rd District Court of Appeal. The court of appeal hard affirmed that retirees enjoyed all protections outlined in both section 202 and 203 of the Labor Code.
Along with holding up the lower court’s decision, the Supreme Court affirmed that McLean and the state were proper plaintiffs and defendants respectively.