Why it matters: Serving as an important reminder to employers, Target reached a $350,000 settlement with a group of almost 4,500 former employees who sued after the store allegedly took too long to send their final paychecks. The class claimed the retailer violated California Labor Code Section 201 by failing to make timely payments to terminated employees of their final wages, triggering statutory penalties under Section 203. Employers wishing to avoid litigation and a six-figure settlement would be well-served to ensure timely payment to terminated employees.

Detailed Discussion

Aileen Bernardino filed a putative class action against her former employer Target, alleging in her amended complaint that the retailer violated the California Labor Code with respect to the final payment of wages to terminated employees. Labor Code Section 201 provides that “[i]f an employer discharges an employee, the wages earned and unpaid at the time of discharge are due and payable immediately.” Section 203 provides that for violations of Section 201, “the wages of the employee shall continue as a penalty from the due date thereof at the same rate until paid or until an action therefor is commenced; but the wages shall not continue for more than 30 days.”

After initial discovery and motions, the parties attended a settlement conference. Target had provided class data to the plaintiff that revealed the date of termination and the date the final paycheck was tendered for potential class members.

The parties were able to reach a deal totaling $350,000.

From that amount, Target agreed to pay $102,500 for class counsel, $7,500 for the class representative, $10,000 to the Labor and Workforce Development Agency, and an estimated $35,000 in settlement fees. The class would share the remaining balance, or net settlement amount.

The settlement class – California Target employees from July 9, 2009, to the present who were terminated involuntarily – will receive at least $15 each. Each of the 4,478 class members will receive a share based on the number of days his or her final payment was late (the days between the date of termination and the date the final paycheck was issued), divided by the aggregate days late for all class members, multiplied by the value of the net settlement amount.

Both sides acknowledged the risks of continuing litigation, particularly on the issue of whether Target’s violations of Section 201 were willful, which is the standard required to obtain statutory penalties under Section 203. Although the “willful” requirement does not impose a burden of “deliberate evil purpose,” a plaintiff must establish that the employer intentionally failed or refused to perform an act required by law.

The parties noted that no published decisions establish when a late final wage payment is considered “intentional,” leaving potential hurdles for both sides as an issue of first impression.

To read the joint motion for preliminary settlement approval in Bernardino v. Target Corp., click here.