Ninth Circuit: Furlough Requires Payment of Final Wages
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APPLIES TO All Employers with Employees in CA |
EFFECTIVE September 22, 2023 |
QUESTIONS? Contact HR On-Call |
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Discussion
The Ninth Circuit Court of Appeals determined that furloughed employees are entitled to payment of their accrued vacation time immediately upon furlough, even if the employees are not permanently terminated until a later date.
In Harstein v. Hyatt Corporation, a former employee filed a class and Private Attorneys’ General Act (PAGA) claim, alleging that her former employer failed to timely pay the accrued vacation time to employees who were furloughed in March of 2020, even though the employees were not officially terminated from their employment until June of 2020. Under California law, a failure to pay all unused accrued vacation time, along with all other wages earned immediately at the time of termination, triggers penalties of a day’s wages until all final wages are paid (i.e., waiting time penalties), which are generally capped at 30 days.
California’s Labor Code requires that, when an employment relationship comes to an end, employers must promptly pay any unpaid wages to the departing employee. More specifically, when an employer discharges an employee, the wages earned and unpaid at the time of the discharge become due and payable immediately. In deciding this case, the Ninth Circuit relied primarily on a non-binding Department of Labor Standards Enforcement (DLSE) opinion letter and the DLSE’s Policies Interpretations Manual, which state that when an employee is temporarily laid off without a specific return date within the normal pay period, employment should be treated as “terminated,” and therefore, final wages become due to be paid immediately.
The Court found that, because the employees were temporarily laid off in March 2020 for longer than a normal pay period and without notice of a specific return date, the employer should have paid the accrued vacation pay in March 2020 when it issued the furlough, rather than in June 2020 when the furlough became a permanent layoff.
The case has been sent back to the district court for further consideration on whether the employer’s actions were willful, so employers should continue to monitor the progression and interpretations in this case.
Action Items
- Review final pay practices and revise for compliance with this updated standard.
- Consult with legal counsel regarding specific application of this standard to individual furlough circumstances.
Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2023 ManagEase