On Friday, Nov. 14, 2014 at 6:38 p.m., Taryn Nishiki, office manager and paralegal at Bay Area law firm Danko Meredith earning $250 a day, emailed her resignation to the firm’s two partners without prior notice. At the time she quit, Nishiki had received all compensation owed to her except $2,880.31 in unused vacation time.
The firm mailed Nishiki a handwritten check signed by firm partner Kristine Meredith on Tuesday, Nov. 18. The amount in numerals in the dollar amount box of the check was correct: “2,880.31.” The amount spelled out on the check accidentally was “Two thousand eight hundred and 31/100,” $80 less than the correct amount. On Nov. 26 at 9:46 a.m. – the day before Thanksgiving — Nishiki emailed Meredith that she had been unable to deposit the check because of the inconsistency between the numerical and spelled out amounts.
After incorrectly insisting that the first check was negotiable and offering only to send Nishiki a second check for $80, the firm mailed Nishiki a corrected check for $2,880.31 on Dec. 5.
California law requires an employer to pay an at-will employee who resigns without notice all unpaid wages, including the value of unused vacation, “not later than 72 hours” after receiving the resignation. If the employer “willfully fails to pay” the employee all wages due, the employee is entitled to penalty pay of up to 30 days at the employee’s daily wage rate until the amount owed is paid.
Earlier this month, the California Court of Appeal ruled Danko Meredith owed Nishiki $2,250 as a waiting time penalty, plus $86,160 in attorney’s fees plus additional fees for the time Nishiki’s attorney spent on the appeal. Besides reminding employers to use special care in preparing a departing employee’s final paycheck, the ruling teaches four important lessons.
Lesson One: The employer’s time to send the final pay to an at-will employee who resigns begins to run when the employer actually receives the employee’s resignation. There was no evidence Danko Meredith opened Nishiki’s after-hours Friday resignation email any earlier than when the firm’s bookkeeper read the email on Saturday, the following day. Starting the clock when the after-hours email was sent, said the court, would undermine the statute’s “clear intent to provide an employer a reasonable time” that is, a full 72 hours, “to pay an employee who quits without notice.”
Lesson Two: No waiting time penalties are due based on typographical errors in an otherwise timely final paycheck. The employer’s failure to pay a departing employee’s wages is considered willful merely if the employer knew it was not doing something the employer was required to do. The employee need not show the employer acted maliciously. But the court concluded that Danko Meredith’s mistaken omission of the word “eighty” on the spelled-out check was “inadvertent clerical error.” Waiting time penalties did not begin to run when the firm sent Nishiki its defective initial check within 72 hours of learning she had quit, but . . .
Lesson Three: An employer must correct errors in a final paycheck once it learns of them. Waiting time penalties start running when an employer fails to correct an accidental error in final pay once it is brought to the employer’s attention. Danko Meredith should have stopped the original check and sent a new one immediately. Because it did not, the firm was liable to Nishiki for penalty pay, at $250 a day, for the nine days between the day Nishiki alerted the firm to the error and the day Danko Meredith sent the corrected check.
Lesson Four: If an employer challenges the Labor Commissioner’s award in court and the court awards the employee “an amount greater than zero”, the employee will be awarded reasonable attorney’s fees that may far exceed what the employee recovers in wages and penalties. That is designed to discourage appeals of the commissioner’s decisions. Nishiki was awarded $86,160 in attorney’s fees against Danko Meredith – nearly 40 times the penalties assessed against the firm. Because Danko sought judicial review of the commissioner’s “relatively modest” award, it had only itself to blame, said the court of appeal, for the substantial attorney’s fees Nishiki incurred to retry the entire case in court, including issues on which she did not prevail before the commissioner. And that fee award will increase by the value of the hours Nishiki’s attorney spent on the appeal.
Dan Eaton is a partner with the San Diego law firm of Seltzer Caplan McMahon Vitek where his practice focuses on defending and advising employers. He also is an instructor at the San Diego State University Fowler College of Business where he teaches classes in business ethics and employment law. He may be reached at [email protected]. His Twitter handle is @DanEatonlaw.
