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August 17, 2021

Court of Appeal Rules in Favor of FLC and WG Member Growers in Waiting Time Penalties Case

[Updated: See Editor’s note below]

On Thursday, August 12, 2021, the California Court of Appeal issued its opinion in Jamie Zepeda Labor Contracting v. Department of Industrial Relations, Division of Labor Standards Enforcement, a case which had the potential to upset longstanding pay practices in the agricultural industry and expand the ability of the California Division of Labor Standards Enforcement (DLSE) to issue expensive citations to employers. Since 1985, the DLSE has been able to issue citations to employers for minimum wage violations. In 2014, the Legislature gave the DLSE new authority to recover “waiting time penalties” for minimum wage violations. Waiting time penalties are assessed when an employer fails to pay final wages upon discharge, such as when the employee is fired or quits, and can reach up to a maximum of 30 days of pay.  

In the Zepeda case, the Court of Appeal was asked to decide whether the DLSE could issue a citation for waiting time penalties even when an employer pays its workers all minimum wages owed on the regular weekly payday. Because of its importance to members, and the wider agricultural industry, Western Growers, in conjunction with other agricultural industry advocacy groups, worked with Sheppard Mullin Richter and Hampton attorneys Babak Yousefzadeh and Brian Fong to file an amicus curiae, or “friend of the court” brief to help educate the Court of Appeal on the industry’s perspective.

We are glad to report that the Court of Appeal decided that the DLSE could not issue minimum wage citations for waiting time penalties when an employer pays its workers all minimum wages owed on the regular weekly payday.

The Zepeda case started when the DLSE audited the pay practices of Coachella Valley farm labor contractor, Jaime Zepeda Labor Contracting, Inc. (JZLC), and the work JZLC did for growers Richard Bagdasarian, Inc. (RBI) and/or Anthony Vineyards, Inc. (AVI) during the 2014, 2015, and 2016 grape seasons.  While JZLC’s workers performed any number of agricultural tasks, for RBI and AVI during each grape season, such as tying, pruning, weeding, and harvesting, it treated employees as continuously employed throughout each grape season and paid them on the regular weekly payday. Yet, even though JZLC had longstanding employment relationships with its workers, the DLSE determined JZLC’s workers were legally discharged from employment after completion of each agricultural task. In other words, the DLSE found that workers were discharged and owed final wages on the day they finished tying up, finished pruning, finished weeding, and finished harvest. 

Even though JZLC paid its employees on the regular weekly payday, including all minimum wages, the DLSE issued four separate citations to JZLC, RBI, and AVI, totaling almost $350,000 and consisting predominantly of waiting time penalties. JZLC, RBI, and AVI asked the Superior Court to review the DLSE’s decision and successfully persuaded the Superior Court that the DLSE could not issue the citations because JZLC had paid its workers all minimum wages owed on the regular weekly payday. The DLSE appealed, the case was argued on July 15, 2021 and the Court of Appeal’s decision came down on August 12, 2021.

The Court of Appeal decided that because JZLC, RBI, and AVI had paid their workers all minimum wages owed on the regular payday, the DLSE did not have the authority to impose waiting time penalties if all minimum wages were paid on the regular payday. The Court of Appeal did not decide whether the DLSE’s argument that workers are discharged after completing “seasonal activities,” and the DLSE will probably continue to push this approach in its enforcement activities.  Members are encouraged to ensure workers are paid promptly, especially around the conclusion of seasonal activities. Members should expect the next iteration of DLSE audits will look at any reason to find minimum wages were not paid to impose waiting time penalties.

Editor’s Note: To be clear, the court did not say employers can avoid section 203 waiting time penalties if they pay all wages due by the next payday following a season ending. Rather the court said if an employer pays all wages owing on the next payday after a quit or a termination (as in due to a season ending), they are not subject to a failure to pay minimum wage penalty. If, however, the employer pays all wages due on the next payday after a quit or a termination (e.g., due to a season ending), the court in this case expressed no opinion on whether the employer is subject to section 203 waiting time penalties.  This case does not change existing law on section 203 penalties, as the court expressly declined to address that issue.

Brian S. Fong is an associate in the Labor and Employment Practice Group in Sheppard Mullin’s San Francisco office.