On August 19, 2014, a California Court of Appeal held that the requirements of Labor Code sections 202 and 203 apply not only to employees who quit, but also to employees who retire.  In McLean v. State of California et al., No. C074515 (Cal. Aug. 19, 2014), the plaintiff filed a putative class action lawsuit on behalf of all employees employed by the State of California who retired from their employment between November 2010 and March 2011, who did not receive prompt payment of wages as required by Labor Code section 202.  Among other things, the putative class sought waiting time penalties under Labor Code section 203.  At the trial level, the defendants’ demurrer was sustained without leave to amend because the plain text of Labor Code section 202 requires prompt payment of wages owed only for employees who “quit his or her employment.”  Because the putative class sought penalties for retired employees, the trial court determined that the employer could not have violated Labor Code section 202.  Nevertheless, the Court of Appeal reversed and found that the term “quit” in Labor Code section 202 also encompasses retired employees.

By way of background, under the plain text of Labor Code section 202(a), if an employee “quits,” an employer must pay final wages owed within 72 hours, or immediately at the time of resignation if given 72 hours-notice of the employee’s intent to quit.  Additionally, if an employer willfully fails to pay any wages to an employee who “quits,” the employer is subject to “waiting time penalties” under Labor Code section 203.  Waiting time penalties are measured at the employee’s daily rate of pay at the time of termination of employment and is calculated by multiplying the daily wage by the number of days that the employee was not paid, up to a maximum of 30 days.  The statute of limitations for this penalty is three years.

In Mclean, the defendants argued that it was not subject to waiting time penalties because the plaintiff retired, rather than quit.  In doing so, the defendants asserted that the terms “quit” and “retires” have different meanings because the Legislature used only the term “quits” in Labor Code sections 202(a) and 203, while it used both “quits” and “retires” in Labor Code section 202(c).  Hence, the defendants maintained that “retires” should not be implied in Labor Code section 202(a) and section 203.  In other words, if “quits” includes “retires,” then the use of “retires” in Labor Code section 202(c) is superfluous.  However, the Court of Appeal rejected the defendants’ argument based on legislative intent.  Instead, the Court found that Labor Code section 202(a) and 202(c) were written at different times and in different contexts; and therefore, the use of the term “retires” in section 202(c) does not impact the meaning of the term “quits” in section 202(a).

In conclusion, the Court held that based on the purpose and intent of the Labor Code section 202—which is to be liberally construed in favor of protecting employees’ payment of wages—an employee who “retires” falls into the category of one who “quits.”  As a result, the Court held that the retired plaintiff could pursue her claim for waiting time penalties.

The practical takeaway from this case is simple: all employers must promptly pay wages to employees who both quit and retire.  A failure to do so can lead to significant liability, including waiting time penalties, costs of suit and expenses, and reasonable attorney fees.