Review Granted in Smith v. Superior Court

On January 19, 2004, the California Supreme Court granted a petition for review in Smith v. Superior Court (2004) 123 Cal.App.4th 128. As a result of the decision, the previously published opinion in Smith is superseded and is no longer citable law.

Smith was a California wage and hour case brought by hair model who worked for a single day at a cosmetic company's one-day show. The workers were not promptly paid. California law provides employers who terminate their workers' employment must pay the employees their final pay immediately upon termination, except for certain limited circumstances under which an employer may have up to 72 hours to calculate the wages due to certain kinds of workers. When the employer is late in paying final wages, penalties begin to accrue.

In Smith, the plaintiff, on behalf of a group of fellow models, asserted a claim for such pay and penalties in a class action. The Los Angeles County Superior Court rejected the Labor Code penalty claims, granting a summary adjudication motion in favor of the employer on the ground that the ending of a fixed term employment was not a termination or resignation that triggers the prompt pay requirements.

The plaintiff petitioned the Court of Appeal for a writ of mandate. The Court of Appeal agreed to hear the writ, but ruled against the employee, holding that being "discharged," for the purpose of statutes requiring immediate payment of wages, did not include completion of a set period of employment or specific task, and that the model, therefore, was not a "discharged" employee.

The relevant code sections include Labor Code §§ 201 and 203:

201:  If an employer discharges an employee, the wages earned and unpaid at the time of discharge are due and payable immediately. An employer who lays off a group of employees by reason of the termination of seasonal employment in the curing, canning, or drying of any variety of perishable fruit, fish or vegetables, shall be deemed to have made immediate payment when the wages of said employees are paid within a reasonable time as necessary for computation and payment thereof; provided, however, that the reasonable time shall not exceed 72 hours, and further provided that payment shall be made by mail to any employee who so requests and designates a mailing address therefor.

203. If an employer willfully fails to pay, without abatement or reduction, in accordance with Sections 201, 201.5, 202, and 205.5, any wages of an employee who is discharged or who quits, 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. An employee who secretes or absents himself or herself to avoid payment to him or her, or who refuses to receive the payment when fully tendered to him or her, including any penalty then accrued under this section, is not entitled to any benefit under this section for the time during which he or she so avoids payment.

For some reason, the litigants didn't consider Labor Code § 202 to be relevant. The Court of Appeal focused on the word "discharge," and held as follows:

In this case, we conclude that an individual hired for one day at a flat fee to model in a hair show is not “discharged” by the hair show promoter, within the meaning of Labor Code section 201, when the hair show is finished and the model leaves. Accordingly, the hair show promoter is not required, under Labor Code section 201, to pay the model “immediately” upon completion of the hair show and the model is not entitled to a “waiting time penalty” pursuant to Labor Code section 203, if the model is not promptly paid. Therefore, we deny the model’s petition for writ of mandate challenging respondent trial court’s grant of summary adjudication of the causes of action based on a violation of the Labor Code.

This decision was a terrible holding that completely undermined the rationale of Labor Code § 203's "waiting time" penalty. If allowed to stand, it could completely end waiting time penalties for any employees engaged for a fixed time, including monthly, weekly or "per diem" workers, or certain "day-to-day" temp workers who employers purport to hire each day, for a term of one day only.

In California, many industries make per diem hires on a regular basis. Unless the Supreme Court reverses the lower court's decision, employers will have little incentive to promptly pay the wages of their fixed term workers, whose only recourse for unpaid wages will be a complaint -- and long wait -- with the Labor Commissioner's office, or a small claims court lawsuit. This rule will hurt some of California's most vulnerable employees: in the agricultural industry, where workers often do not speak English and have little political power or understanding of the California legal system; and in the entertainment industry, where the fear of blacklisting causes most workers to accept even egregious Labor Code violations simply so they can continue to work in their chosen profession.

However, there remains one glimmer of hope for fixed term employees, even if the Supreme Court agrees with the narrow holding that such workers should not be deemed "discharged" at the conclusion of their engagement. For some reason, the employee did not contend the alternative legal theory that the end of her term constituted "quitting." The court noted that

"this petition concerns only the causes of action based on a violation of Labor Code sections 201 and 203, which require the immediate payment of wages to an employee upon the employee's "discharge" and impose a penalty for the failure to timely pay. L'Oréal conceded for purposes of the summary adjudication that Smith was an employee. Therefore, we do not decide this issue. Smith does not argue that she "quit," within the meaning of Labor Code section 202, subdivision (a). [FN1 - Labor Code section 202, subdivision (a) provides in general for payment of wages within 72 hours if an employee quits.] Thus, we need only decide whether Smith was "discharged" within the meaning of Labor Code section 201."

Perhaps the reason Smith did not argue that she "quit" is because she had a written contract for a fixed term. Section 202 expressly excludes employees with a written contract for a fixed term from the waiting time penalties. However, few per diem employees have written contracts, and this exception would apply to few of them. If Smith was not among them, she may come to regret not have argued the applicability of Labor Code § 202.

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