Court Denies Equitable Exceptions to Waiting Time Penalties

Hospitality Law August 2018

Carly Baratt, Associate in the Employment, Labor & Workforce Management practice, in the firm’s New York office, authored an article in Hospitality Law, titled “Court Denies Equitable Exceptions to Waiting Time Penalties.”

Following is an excerpt:

A California appellate court recently provided additional guidance to California employers regarding “waiting time” penalties, so-called because they are awarded for an employer  effectively making the employee wait for his or her final paycheck, in Diaz v. Grill Concept Servs., Inc., 23 Cal. App. 5th 859 (Cal. App. Div. 2018).

The legal issues presented in this case were a restaurant’s underpayment of its employees who had quit or been fired and its liability for anything beyond the reimbursement of underpaid wages. These issues stemmed from the restaurant’s location — in a hotel near the LAX Airport and, more specifically, within a geographic zone regulated by the City of Los Angeles. Pursuant to Los Angeles Ordinance Number 178, 432 (codified at L.A. Mun. Code, §§ 104.101 et seq.), the restaurant, as a “hotel employer,” was required, inter alia, to pay its employees a “living wage” higher than the state minimum wage. The source to which the “living wage” was keyed changed on July 24, 2010, when the ordinance was amended to a bulletin published annually by the Los Angeles Bureau of Contract Administration. However, the restaurant continued to pay its employees the living wage prescribed by the original ordinance, which was lower than the amended ordinance, until June 2014, when it received a demand letter from two employees.

While the restaurant promptly reimbursed its employees for the full amount of underpayment, it disputed liability for waiting time penalties under California Labor Code Section 203. The trial court awarded waiting time penalties, finding that the restaurant’s failure to pay the living wage set by the ordinance was “willful” within the meaning of the Labor Code and that it was not authorized to waive waiting time penalties for equitable reasons.

On appeal, the California Appeals Court wholly affirmed the trial court’s order. Reviewing the lower court’s finding of willfulness de novo, the court rejected the restaurant’s arguments that it was unaware of the amended ordinance, and that even if had seen the amended ordinance, the restaurant would not have been able to understand it, rendering its underpayment a mere mistake.