1389
[No. S170758. Nov. 18, 2010.]
JORGE A. PINEDA, Plaintiff and Appellant, v.
BANK OF AMERICA, N.A., Defendant and Respondent.
1390
1391
1392
Counsel
Spiro Moss Bamess, Spiro Bamess and Gregory N. Karasik for Plaintiff and
Appellant.
Paul, Hastings, Janofsky & Walker, Paul W. Cane, Jr., Stephen P. Sonnenberg,
Thomas E. Geidt, Maria A. Audero, Heather N. Mitchell and Jeffrey P.
Michalowski for Defendant and Respondent.
Orrick, Herrington & Sutcliffe, Gary S. Siniscalco, Patricia K. Gillette,
Andrew R. Livingston and Greg J. Richardson for California Employment
Law Council as Amicus Curiae on behalf of Defendant and Respondent.
Jones Day, Richard S. Ruben, Craig E. Stewart and Harry I. Johnson III for
Ralphs Grocery Company as Amicus Curiae on behalf of Defendant and
Respondent.
Opinion
MORENO, J. When an employee is terminated or resigns from his or her
employment, final wages are generally due and payable immediately. (Lab.
1393
Code, §§ 201, 202.)1 Section 203 provides that, if an employer willfully fails
to timely pay final wages, “the wages of the employee shall continue as a
penalty from the due date thereof at the same rate until paid or until an action
therefor is commenced; but the wages shall not continue for more than 30
days.” (§ 203, subd. (a), italics added (hereafter section 203(a)).) A one-year
statute of limitations typically governs actions to recover penalties (Code Civ.
Proc., § 340, subd. (a)), but section 203 further provides that an employee
may sue for “these penalties at any time before the expiration of the statute of
limitations on an action for the wages from which the penalties arise.” (§ 203,
subd. (b) (hereafter section 203(b)); see Murphy v. Kenneth Cole Productions,
Inc. (2007) 40 Cal.4th 1094, 1109 [56 Cal.Rptr.3d 880, 155 P.3d 284]
(Murphy) [“[T]he Legislature expressly provided that a suit seeking to
enforce the section 203 penalty would be subject to the same . . . statute of
limitations as an action to recover wages.”].)
This case asks us to resolve two issues: First, does a different statute of
limitations apply when an employee seeks to recover only section 203
penalties (because, as in this case, final wages were paid—albeit belatedly—
prior to the filing of the action), as opposed to when an employee seeks both
final wages and penalties? Second, are section 203 penalties recoverable as
restitution under California’s unfair competition law (UCL) (Bus. & Prof.
Code, § 17200 et seq.)? Our answer to both questions is “no.” Section 203(b)
sets forth a single limitations period governing all actions to recover section
203 penalties regardless of whether an employee seeks both unpaid wages
and penalties or penalties alone. Further, section 203 penalties are not
recoverable as restitution under the UCL because employees have no owner-
ship interest in the funds. We accordingly reverse the Court of Appeal’s
contrary judgment and remand for further proceedings.
Facts and Background
Plaintiff Jorge A. Pineda was employed by defendant Bank of
America, N.A.2 He gave two weeks’ notice of his resignation, which occurred
on May 11, 2006. Defendant did not pay plaintiff his final wages on his last
day, as required under section 202, but instead paid him on May 15, four days
late.
Plaintiff filed this action on October 22, 2007, seeking to represent a class
of former Bank of America employees whose final wages were untimely paid.
The complaint asserts two causes of action. The first alleges defendant failed
to timely pay plaintiff and class members final wages as required by section
1-All subsequent unlabeled statutory references are to the Labor Code unless otherwise
indicated.
2-The factual and procedural history is largely taken from the Court of Appeal opinion.
1394
201 (applying to employees who are terminated) or section 202 (applying to
employees who quit) and seeks penalties pursuant to section 203. Plaintiff’s
second cause of action alleges defendant’s failure to timely pay final wages
violates the UCL, and seeks restitution of unpaid section 203 penalties.
The trial court granted defendant’s motion for judgment on the pleadings.
It concluded that a one-year statute of limitations (Code Civ. Proc., § 340,
subd. (a)) applies when, as in this case, an employee files an action seeking
only section 203 penalties (as opposed to an action seeking unpaid wages and
§ 203 penalties); thus, the trial court concluded, the time for plaintiff to file
his action had expired. The trial court also concluded that section 203
penalties are not recoverable as restitution under the UCL. The trial court
denied plaintiff leave to amend to substitute a new plaintiff in the first cause
of action. The Court of Appeal affirmed in all respects. We granted plaintiff’s
petition for review.3
Discussion
I. Section 203(b) Governs All Actions for Section 203 Penalties
We first independently review the Court of Appeal’s construction of
section 203. (Imperial Merchant Services, Inc. v. Hunt (2009) 47 Cal.4th 381,
387 [97 Cal.Rptr.3d 464, 212 P.3d 736].) In doing so, “it is well settled that
we must look first to the words of the statute, ‘because they generally provide
the most reliable indicator of legislative intent.’ [Citation.] If the statutory
language is clear and unambiguous our inquiry ends. ‘If there is no ambiguity
in the language, we presume the Legislature meant what it said and the plain
meaning of the statute governs.’ [Citations.] In reading statutes, we are
mindful that words are to be given their plain and commonsense meaning.
[Citation.]” (Murphy, supra, 40 Cal.4th at p. 1103.) Thus, we “avoid a
construction that would produce absurd consequences, which we presume the
Legislature did not intend. [Citations.]” (People v. Mendoza (2000) 23 Cal.4th
896, 908 [98 Cal.Rptr.2d 431,4 P.3d 265].) “We have also recognized
that statutes governing conditions of employment are to be construed broadly
in favor of protecting employees. [Citations.]” (Murphy, at p. 1103; cf.
Smith v. Superior Court (2006) 39 Cal.4th 77, 82 [45 Cal.Rptr.3d 394,
137 P.3d 218] (Smith) [purpose of § 203 is to compel prompt wage payment
upon separation from employment].) We therefore begin our inquiry by
reviewing the pertinent statutory language. While section 203 is obviously
our primary focus, resolving this issue requires that we also be mindful of the
statute’s interplay with several relevant provisions located in the Code of
Civil Procedure.
3-Plaintiff does not seek review of the court’s denial of leave to amend.
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Section 203(a) provides: “If an employer willfully fails to pay,
without abatement or reduction, in accordance with Sections 201, 201.3,
201.5, 202, and 205.5, any wages of an employee who is discharged or who
quits, the wages of the employee shall continue as a penalty from the due
date thereof at the same rate until paid or until an action therefor is
commenced; but the wages shall not continue for more than 30 days.” (Italics
added.) Code of Civil Procedure section 340, subdivision (a) provides that a
one-year statute of limitations applies to “[a]n action upon a statute for a
penalty or forfeiture . . . .” (Italics added.) Thus, if section 203(a) comprised
the entire statute, a suit to recover its provided-for penalties would undoubt-
edly have to be filed within one year of the accrual of the cause of action.
However, Code of Civil Procedure section 312 acknowledges the
Legislature can, if it so chooses, prescribe a different statute of limitations to
govern specific civil actions.4 To that end, section 203(b) provides, “Suit may
be filed for these penalties at any time before the expiration of the statute of
limitations on an action for the wages from which the penalties arise.”
Actions for final wages not paid as required by sections 201 and 202 are
governed by Code of Civil Procedure section 338, subdivision (a), which
provides that a three-year statute of limitations applies to “[a]n action upon a
liability created by statute, other than a penalty or forfeiture.”
As we noted in Murphy, supra, 40 Cal.4th at page 1109, in enacting section
203(b) the Legislature obviously intended to alter the statute of limitations
that would otherwise have applied to actions to recover section 203 penalties.
Indeed, no one disputes that when an employee sues to recover both unpaid
final wages and the resulting section 203 penalties, the suit is governed by the
same three-year limitations period that would apply had the employee sued to
recover only the unpaid wages. The disputed issue in this case is whether a
different statute of limitations applies to an action to recover section 203
penalties when, as here, an employee sues to recover only section 203
penalties.
Plaintiff urges us to conclude the Legislature intended for a single statute
of limitations—the one set forth in section 203(b)—to govern the filing of
any and all suits for section 203 penalties, regardless of whether a claim for
unpaid final wages accompanies the claim for penalties. He contends this is
the only plausible construction of section 203, and his contention has merit.
Absent explicit statutory language to the contrary, common sense would
suggest that, where the Legislature has set forth a statute of limitations in one
part of a statute, the prescribed limitations period governs the filing of actions
4-Additionally, Code of Civil Procedure section 340, subdivision (a), itself provides that its
one-year limitations period does not apply to an action for a penalty “if the statute imposing it
prescribes a different limitation.”
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provided for in another part of the same statute. In providing when “[s]uit
may be filed for [section 203] penalties” (§ 203(b)), the Legislature could
have employed language unambiguously limiting the application of section
203(b)’s limitations period to those suits that seek both unpaid wages and
penalties. For example, it could have provided that “[s]uit for unpaid final
wages and these penalties may be filed at any time before . . . .” It did not.
Urging this court to adopt a contrary interpretation, defendant contends the
Legislature did explicitly provide that an action to recover only section 203
penalties is not governed by section 203(b). Defendant relies on the phrase
“action for the wages from which the penalties arise,” arguing this language
demonstrates the Legislature intended for section 203(b) to apply only when
a claim for penalties is accompanied by a claim for unpaid final wages.
Defendant reasons that when an employee sues for section 203 penalties
alone because his or her final wages have been paid, albeit late, there is no
“action for the wages from which the penalties arise” and section 203(b) is
thus inapplicable. Accordingly, defendant concludes, the one-year limitations
period that generally applies to actions for penalties controls. The Court of
Appeal, relying on McCoy v. Superior Court (2007) 157 Cal.App.4th 225,
229-230 [68 Cal.Rptr.3d 483] (McCoy), adopted this reasoning. We conclude,
however, that this is an unreasonable reading of the statutory language.
Defendant’s interpretation misapprehends the purpose of the provision’s
reference to “the statute of limitations on an action for the wages from which
the penalties arise.” (§ 203(b).) The only plausible inference to be drawn is
that the Legislature intended to ensure that the statute of limitations on an
action for section 203 penalties tracks the statute of limitations governing
actions for unpaid final wages. In so doing, the Legislature wanted to make
certain employees would not face different limitations periods for claims that
arise out of the same underlying facts, i.e., nonpayment of final wages, and
that would usually, but not always, be asserted in the same suit. The language
offers the additional benefit of maintaining consistency in the event of future
statutory alteration. By generally referencing the statute of limitations for
unpaid final wages, rather than specifically providing that section 203 penal-
ties are governed by a three-year statute of limitations, the statute ensures that
any changes by a future Legislature to the limitations period governing
unpaid final wages would automatically change the limitations period govern-
ing section 203 penalties without any need to amend the statute.
Moreover, defendant’s interpretation ignores the.Legislature’s grammatical
choices—specifically, its use of definite and indefinite articles—in section
203(b). Use of the indefinite articles “a” or “an” signals a general reference,
while use of the definite article “the” (or “these” in the instance of plural
nouns) refers to a specific person, place, or thing. (Gamer, The Redbook: A
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Manual on Legal Style (2d ed. 2002) § 10.38, p. 173.) In section 203(b), the
use of the definite article “the” before “statute of limitations” and the
indefinite article “an” before “action for the wages” supports plaintiff’s, rather
than defendant’s, construction. Section 203(b) reads: “Suit may be filed for
these penalties at any time before the expiration of the statute of limitations
on an action for the wages from which the penalties arise.” (Italics added.)
The italicized language suggests the Legislature was referring to the specific
limitations period governing any and all suits for unpaid final wages, not a
particular suit filed by an employee for unpaid final wages.5 By contrast, had
the Legislature used the definite article “the” before “action for the wages,”
as in “suit may be filed for these penalties at any time before the expiration of
the statute of limitations on the action for the wages from which the penalties
arise,” it would suggest the Legislature was referring to a specific suit for
unpaid final wages filed by an employee who seeks section 203 penalties as
well.6
Finally, adopting defendant’s interpretation would undermine the
purposes of limitations periods. As we have recently explained, statutes of
limitations serve a number of functions including “to prevent stale claims,
give stability to transactions, protect settled expectations, promote diligence,
encourage the prompt enforcement of substantive law, and reduce the volume
of litigation. [Citations.]” (Stockton Citizens for Sensible Planning v. City of
Stockton (2010) 48 Cal.4th 481, 499 [106 Cal.Rptr.3d 858, 227 P.3d 416].) To
“ ‘necessarily
that end, a limitations period fix[es]’ a ‘definite period[] of
time’ [citation]” (Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 410 [87
Cal.Rptr.2d 453, 981 P.2d 79]) and begins to run when a cause of action has
accrued, that is, when the cause “ ‘is complete with all of its elements.’
[Citations.]” (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797,
806-807 [27 Cal.Rptr.3d 661, 110 P.3d 914]; see Black’s Law Dict. (7th ed.
1999) p. 21, col. 2.)
Under defendant’s construction, it is unclear what limitations period begins
to run when a section 203 claim accrues, nor is it clear how fixed and definite
the period is. An illustration reveals the problems with defendant’s interpreta-
tion. Assume three employees: A, B, and C. All three leave their jobs on the
same day and their employers fail to pay them their final wages as required
by sections 201 and 202. A’s employer never pays the owed wages and so A
5-The use of both indefinite and definite articles in section 203 underscores that the
Legislature’s choice to use one as opposed to the other was deliberate and should be accorded
significance.
6-At oral argument, defense counsel noted a definite article precedes the word “wages” in
section 203(b). This is true, but irrelevant. In determining the controlling limitations period, we
are concerned with whether the Legislature was referring to a specific action for wages or to
any and all actions for wages. Thus, it is the article preceding the word “action” in section
203(b) that is relevant.
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can, anytime before three years have expired, timely file suit for both unpaid
final wages and the 30 days of accumulated section 203 penalties. By
contrast, B’s employer pays the owed final wages, albeit six months late. As a
result, no claim for unpaid wages remains and, under defendant’s construc-
tion, the three-year limitations period that once would have governed B’s
available section 203 claim is now, six months after the statute of limitations
began to run, a one-year limitations period. Finally, C’s employer pays the
final wages over a year after they were due. No claim remains for the now
paid final wages and, as defense counsel acknowledged at oral argument, C
would no longer have a claim for section 203 penalties, as more than a year
has passed since the claim initially accrued.7 Defendant’s interpretation
would, at best, lead to unwieldy and inconsistent results eroding the stability
that statutes of limitations are intended to afford.8 At worst, defendant’s
construction would risk permitting employers to “game the system” and
control what limitations period governs their employees’ section 203 claims.
Absent explicit evidence to the contrary, we presume the Legislature did not
intend such an absurd result. (See Smith, supra, 39 Cal.4th at p. 83.)
In light of the unambiguous statutory language, as well as the
practical difficulties that would arise under defendant’s interpretation, we
conclude there is but one reasonable construction: section 203(b) contains a
single, three-year limitations period governing all actions for section 203
penalties irrespective of whether an employee’s claim for penalties is accom-
panied by a claim for unpaid final wages. We accordingly disapprove
McCoy v. Superior Court, supra, 157 Cal.App.4th 225.
Even if defendant’s interpretation constituted a plausible alternative read-
ing of the statutory language, requiring us to examine extrinsic evidence of
the Legislature’s intent, such as legislative history, we would still conclude
plaintiff’s construction is the correct one. The Legislature first enacted a civil
penalty provision similar to section 203 in 1915. (Stats. 1915, ch. 143, § 3,
p. 299.) Like section 203, the 1915 act provided that, when an employer
failed to timely pay final wages, the employee’s wages would continue as a
penalty until paid, up to 30 days. (Stats. 1915, ch. 143, § 3, p. 299.) In 1919,
7-In McCoy, supra, 157 Cal.App.4th at page 230,
the Court of Appeal dismisses this
possibility, stating without elaboration that an employer’s payment of final wages over a year
late would “subject [the employer] to a longer statute of limitations for the penalty . . . .” Not
so. A cause of action for section 203 penalties accrues when an employer fails to pay wages on
an employee’s final workday, not when the wages are actually, albeit belatedly, paid. (See Fox v.
Ethicon Endo-Surgery, Inc., supra, 35 Cal.4th at pp. 806-807.)
8-Indeed, consider a fourth instance in which D
files suit for both unpaid final wages and
section 203 penalties over a year after the claims accrued and, in response to being sued, D’s
employer pays the sought wages. As defense counsel conceded at oral argument, D’s employer
is now free to move to dismiss the claim for section 203 penalties because the action was filed
after a year had passed and, now that the final wages have been paid, section 203(b) no longer
applies.
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the Legislature repealed the then existing law, but adopted essentially the
same provisions in a new act. (Stats. 1919, ch. 202, § 5, p. 296; see Smith,
supra, 39 Cal.4th at p. 87, fn. 4.) “At the time, the Bureau of Labor Statistics
(BLS) was the agency that recommended and enforced such wage-related
legislation. [Citation.]” (Smith, at p. 87.) For that reason, we have previously
consulted its biennial reports “for whatever light they may shed regarding the
purpose of the wage payment legislation. (See People ex rel. Lungren v.
Superior Court (1996) 14 Cal.4th 294, 309 [58 Cal.Rptr.2d 855, 926 P.2d
1042] [although not necessarily controlling, the contemporaneous administra-
tive construction of a statute by those charged with its enforcement and
interpretation is entitled to great weight].)” (Smith, at p. 87.) The Bureau of
Labor Statistics (BLS) biennial reports demonstrate the penalty provision was
“
intended ‘to induce, if not to compel, the employer to keep faith with his
” and to rectify “ ‘a wrong which not only injures the employee
employee’
but is an injury to the public in its tendency to deprive the public of an
” (BLS, 20th
incidental benefit which comes from the employee’s labor.’
Biennial Rep.: 1921-1922 (1923) p. 36.) The BLS’s views confirm the
penalty provision was seen as an important tool in ensuring prompt wage
payment.
Then, in 1937, as part of the act estabfishing the Labor Code, section 203
was enacted.9 (Stats. 1937, ch. 90, § 203, p. 197.) The first iteration of section
203 consisted of a single paragraph containing language virtually identical to
that present in the current section 203(a).10 In its original form, section 203
contained no reference to a statute of limitations and, thus, actions for its
authorized penalties were governed by Code of Civil Procedure section 340,
which then, as now, set forth a one-year statute of limitations for actions
seeking penalties (Stats. 1929, ch. 518, § 1, p. 896). Thus, if an employer
failed to timely pay final wages to an employee who quit or was fired,-11 the
employee would have had one year to sue for the section 203 penalties but,
under Code of Civil Procedure section 338, subdivision (a) (Stats. 1935,
ch. 581, § 1, p. 1673), three years to sue for the unpaid final wages giving
rise to the penalty.
9-In 1927, the Legislature created the Department of Industrial Relations (DIR), shifting
several agencies (including the BLS) under the DIR’s auspices. (Stats. 1927, ch. 440, § 7,
p. 736 as to the BLS.) The DIR was “invested with the power and [was] charged with the duty
of administering and enforcing all laws” related to its divisions, including the BLS. (Id.., § 9,
p. 737.)
10-The differences, as relevant here, were minor, e.g., the original version used “wilfully”
rather than “willfully,” and spelled out “thirty.”
11-Like section 203, sections 201 and 202 were enacted in 1937 (Stats. 1937, ch. 90, §§ 201,
202, p. 197), imposing obligations on employers nearly identical to those imposed by the
current versions of sections 201 and 202.
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The Legislature subsequently amended section 203 in 1939 (Stats. 1939,
ch. 1096, § 1, p. 3026), adding a second paragraph to the statute that, using
language virtually identical to current section 203(b),12 set forth a specific
limitations period. It is reasonable to infer that the Legislature intended for
the new language to eliminate the prior anomaly of related claims being
governed by different limitations periods. While one could suppose, as the
Court of Appeal did in McCoy, supra, 157 Cal.App.4th at page 233, that the
Legislature was moved to act by instances of employees seeking penalties
and unpaid final wages in the same action, there is no evidence the Legisla-
ture intended for the newly enacted limitations period to apply only in such
an instance or that the Legislature intended for section 203 actions to be
governed by varying limitations periods depending on what claims an
employee brought.13
Finally, as we have acknowledged on multiple occasions, “[t]he
public policy in favor of full and prompt payment of an employee’s earned
wages is fundamental and well established” and the failure to timely pay
wages injures not only the employee, but the public at large as well. (Smith,
supra, 39 Cal.4th at p. 82.) We have also recognized that sections 201, 202,
and 203 play an important role in vindicating this public policy. (Smith, at
p. 82; Smith v. Rae-Venter Law Group (2002) 29 Cal.4th 345, 360 [127
Cal.Rptr.2d 516, 58 P.3d 367].) To that end, the Legislature adopted the
penalty provision as a disincentive for employers to pay final wages late. (See
BLS, 20th Biennial Rep.: 1921-1922, supra, p. 36.) It goes without saying
that a longer statute of limitations for section 203 penalties provides addi-
tional incentive to encourage employers to pay final wages in a prompt
manner, thus furthering the public policy.
12-The
1939 version used “such penalties” rather than “these penalties” as does the current
version of section 203(b).
13-Plaintiff cites the DIR’s
1938-1939 annual report, which states the 1939 amendment to
section 203 “extends the time within which suit njay be filed for the collection of penalties
imposed for non-payment of wages. In the past, a suit to collect such penalty had to be
commenced within one year .... The present bill allows the same length of time for the
collection of penalties for non-payment of wages as has always been allowed for the collection
of wages themselves.” (DIR, Annual Rep.: 1938-1939 (1939) [discussing Assem. Bill
No. 2538 (1939-1940 Reg. Sess.)].) In determining what weight to accord an agency’s
construction, we consider “ 1 “the thoroughness evident in its consideration, the validity of its
reasoning, its consistency with earlier and later pronouncements, and all those factors which
give it power to persuade, if lacking power to control.” ’ [Citation.]” (Hoechst Celanese Corp. v.
Franchise Tax Bd. (2001) 25 Cal.4th 508, 524 [106 Cal.Rptr.2d 548, 22 P.3d 324], italics
omitted.) We conclude the report is entitled to little weight. Its discussion of the amendment is
cursory and, more importantly, the report itself admits that most of the DIR’s suggestions were
largely ignored by the Legislature, casting doubt on the neutrality of the DIR’s assertions
regarding legislative intent.
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In conclusion, in light of the statutory language, as well as extrinsic
evidence of the Legislature’s intent, including the legislative history and
considerations of public policy, we hold that the limitations period prescribed
in section 203(b) governs all actions seeking section 203 penalties regardless
of whether the claim for penalties is accompanied by a claim for unpaid final
wages.
II. Section 203 Penalties Are Not Recoverable Under the UCL
We next consider whether an employee may recover section 203 penalties
as restitution under the UCL. (Bus. & Prof. Code, § 17200 et seq.) Contrast-
ing section 203 penalties with the unpaid wages that give rise to the penalties,
the Court of Appeal concluded the answer is no. We agree.
The UCL prohibits “any unlawful, unfair or fraudulent business act or
practice . . . .” (Bus. & Prof. Code, § 17200.) While private individuals can
sue under the UCL (Bus. & Prof. Code, § 17204), courts can issue orders
only to prevent unfair competition practices and “to restore to any person in
interest any money or property . . . which may have been acquired by means
of such unfair competition” (id., § 17203). Thus, a private plaintiff’s “rem-
‘ ’
edies are “generally limited to injunctive relief and restitution.” [Cita-
tions.]” (Clark v. Superior Court (2010) 50 Cal.4th 605, 610 [112 Cal.Rptr.3d
876, 235 P.3d 171].) With regard to restitution, the goal is to restore plaintiff
to the status quo ante. (Cortez v. Purolator Air Filtration Products Co. (2000)
23 Cal.4th 163, 177 [96 Cal.Rptr.2d 518, 999 P.2d 706] (Cortez).) In
explaining why section 203 penalties are not recoverable as restitution, it is
first helpful to briefly discuss why unpaid wages are recoverable.
In Cortez, we held the plaintiff could seek restitution of unpaid overtime
wages via the UCL. (Cortez, supra, 23 Cal.4th at p. 168.) We explained that,
“[o]nce earned, those unpaid wages became property to which the employees
were entitled.” (Ibid.) Thus, it was of no import that the overtime wages had
never been in the possession of the employees; “earned wages that are due
and payable pursuant to section 200 et seq. of the Labor Code are as much
the property of the employee who has given his or her labor to the employer
in exchange for that property as is property a person surrenders through an
unfair business practice.” (Id. at p. 178.) “An order that earned wages be paid
is therefore a restitutionary remedy authorized by the UCL.” (Ibid.)
By contrast, permitting recovery of section 203 penalties via the
UCL would not “restore the status quo by returning to the plaintiff funds in
which he or she has an ownership interest.” (Korea Supply Co. v. Lockheed
Martin Corp. (2003) 29 Cal.4th 1134, 1149 [131 Cal.Rptr.2d 29, 63 P.3d
937].) Section 203 is not designed to compensate employees for work
1402
performed. Instead, it is intended to encourage employers to pay final wages
on time, and to punish employers who fail to do so.14 In other words, it is
the employers’ action (or inaction) that gives rise to section 203 penalties.
The vested interest in unpaid wages, on the other hand, arises out of the
employees’ action, i.e., their labor. Until awarded by a relevant body,
employees have no comparable vested interest in section 203 penalties. We
thus hold section 203 penalties cannot be recovered as restitution under the
UCL.
Disposition
The judgment of the Court of Appeal is reversed and the matter is
remanded for further proceedings consistent with our decision.
George, C. J., Kennard, J., Baxter, J., Werdegar, J., Corrigan, J., and
Richli, J.,* concurred.
14-Plaintiff suggests that, in addition to encouraging prompt payment of final wages, section
203 penalties serve to compensate employees for the injury caused by the late payment of final
wages. Even if true, the penalties still could not be recovered via the UCL, as compensatory
damages are not recoverable as restitution. (Cortez, supra, 23 Cal.4th at p. 173.)
*Associate Justice of the Court of Appeal, Fourth Appellate District, Division' Two, assigned
by the Chief Justice pursuant to article VI, section 6 of the California Constitution.