Penalties: A Long Time Coming

In November 2010, the California Supreme Court clarified that employees may seek what are commonly referred to as Section 203 penalties (referring to Labor Code section 203) for unpaid wages (including meal and rest period violations) for up to three years after the wages were due (which, in many cases, is three years after the last day of employment).

The California Legislature can—and does—prescribe different statutes of limitations for different claims.  In the Labor Code, there is a complicated interplay between statutes of limitations for unpaid wages (typically three years) and those solely for the purposes of receiving penalties (generally one year).  In some instances, employees choose to file actions only claiming Section 203 penalties from a former employer (as opposed to unpaid wages and penalties).   The question is whether the one year or three-year statute of limitations controls such a claim.

In Pineda v. Bank of America (2010 DJDAR 17449), the California Supreme Court settled the question.  The three-year statute of limitations applies when employees make claims only for Section 203 penalties.

As a practical matter, the Court’s opinion shouldn’t change any practices for Humboldt County employers.  Under state and federal laws, employers already keep payroll records for four years and wage records for at least three years.  It may be that the better practice is to retain wage records for at least as long as you retain payroll records—just to be sure you have documentation for those former employees who file claims at the very end of the three-year statute of limitations.   As always, a good defense begins with good documentation.