Litigating California Wage & Hour and Labor Code Class Actions

Another employer policy fomenting class actions, has been a “floating holiday” policy that allows
employees to take a paid day off at the employee’s discretion but does not treat the floating holiday
as vacation–i.e., the employee who does not use the floating holiday is not credited with a day of
vested vacation time, but instead simply loses the opportunity for a paid day off. The DLSE has
opined that an employer may have a use-it-or-lose-it policy with bona fide “holidays,” but only when
the holiday is tethered closely to a specific event. For example, an employer may give employees
Martin Luther King, Jr. Day as a paid day off, on a use-it-or-lose-it basis. But where “holiday” pay
can be claimed on any day, at an employee’s discretion, the DLSE views it as disguised “vacation”
pay, and has opined that an employer must treat any such holiday pay as vested vacation time. 190
Based on this announced interpretation of the law, numerous class actions have been filed against
employers who have a use-it-or-lose-it policy with respect to floating holidays. To date, no court
decision has adopted or rejected the DLSE’s interpretation.
VIII. Waiting Time Penalties
A. Generally
Many class actions assert, on behalf of class members who are former employees, claims
for “waiting time penalties” under Labor Code Section 203. 191
Under California law, all wages due must be paid at the time of termination, unless the
employee quits without notice, and then within seventy-two hours of termination. 192 When
wages of a terminated employee are not timely paid, the employee’s wages continue, as a
penalty, until paid or up to thirty days, whichever is shorter. Thirty days of penalties means
thirty consecutive calendar days, including Saturdays, Sundays and holidays (typically
equivalent to six weeks of pay), rather than simply one month’s pay. Each calendar day
that passes before the employer pays all wages owed triggers an additional day of
penalties at the employee’s regular daily rate, even if the employee is not normally
scheduled to work on all of these days. 193
On its face, the waiting time penalty provision reads as though it were designed to apply
when an employer fails to give a terminating employee the employee’s final paycheck. The
Labor Commissioner, despite regulations providing that a good faith dispute precludes the
190
191
192
193
DLSE Enforcement Manual § 15.1.12, et seq. (“there must be an objective standard by which it can be established that
the leave time is attributable to holidays, sick leave, bereavement leave or other specified leave.”)
The statute of limitations period on Lab. Code § 203 claims is three years, regardless of whether only penalties are
sought or whether underlying wages are also sought in same action. Pineda v. Bank of America, 50 Cal. 4th 1389,
1401 (2010), overruling McCoy v. Sup. Ct., 157 Cal. App. 4th 225, 233 (2008).
Lab. Code § 203.
Mamika v. Barka, 68 Cal. App. 4th 487 (1998).
Seyfarth Shaw LLP | www.seyfarth.com Litigating California Wage & Hour Class Actions (12th Edition) 46