On August 18, 2016, the California Supreme Court confirmed that the final wage payment rules provided for by the California Labor Code apply to retiring employees.

In McLean v. State of California, McLean filed a class action lawsuit against her former employer, the State of California, after the State failed to make “full and prompt payment of wages” when she retired from her employment. The prompt payment provisions of the California Labor Code impose certain timing requirements on the payment of final wages for employees who are discharged and to those who quit their employment. If an employee is discharged, an employer must pay all earned and unpaid wages immediately at the time of discharge. Cal. Lab. Code § 201. If an at-will employee quits his or her employment, the employer must pay the employee no later than 72 hours thereafter unless the employee has given 72 hours’ notice of his or her intention to quit, in which case the employer must make a final payment of the employee’s wages at the time of quitting. Cal. Lab. Code § 202. If an employer willfully fails to pay in accordance with sections 201 and 202, the employer may be subject to additional waiting-time penalties of up to 30 days’ wages. Cal. Lab. Code § 203.

The State filed a demurrer to have McLean’s claim dismissed, arguing that because McLean “retired” from her job, she did not state a claim for statutory penalties under section 203, which only applies when employees “quit” or are “discharged.” The trial court sustained the demurrer without leave to amend, and McLean appealed. On appeal, the Court of Appeals reversed, holding that sections 202 and 203 apply whenever an employee quits, whether to retire or not to retire. The State requested review, which the California Supreme Court granted. On review, the California Supreme Court affirmed the Court of Appeals.

Applying rules of statutory interpretation, the Court explained that, although neither the Labor Code, the Department of Industrial Relations, nor the Division of Labor Standards Enforcement interpret the meaning of the term “quit,” its ordinary meaning clearly encompasses withdrawal from employment for purposes of retirement, just as it would include withdrawal for any other purpose. To find otherwise would be contrary to the remedial purposes of the statute. Indeed, there is no evidence that the legislature ever intended to create a third category of employees, consisting solely of those whose employment is terminated by retirement.

This decision provides clarity for employers should there be any doubt whether retirees must be afforded the same protections as other employees who are either discharged or voluntarily resign from employment.