California Supreme Court rules retirement is the same as quitting when it comes to a final paycheck

Katelyn Kivel Sep. 6, 2016, 10:08am


SAN FRANCISCO (Legal Newsline) -- A retiring employee is considered to be quitting, the California Supreme Court has ruled in McLean v. State of California.

When deputy attorney general Janis McLean retired in 2010, she alleged the state did not pay wages owed within 72 hours pursuant to the labor code section 202. The state argued that as she retired and Section 202 covers employees who quit, not employees who retire, there had been no wrongdoing.

The California Supreme Court affirmed unanimously in August that employees who retire are, in fact, quitting.

“For retiring employees, the decision should provide a measure of comfort in knowing that their future plans are irrelevant with regard to their entitlement to receive their final wages within 72 hours of the last day worked,” labor and employment attorney Josh Rodine, a partner at Seyfarth Shaw, told Legal Newsline.

“For employers, the decision serves as a warning that they need to have processes in place to ensure timely payment of final wages irrespective of the circumstances surrounding the end of employment.”

Although it may have risen in the context of public employment, the McLean decision has implications across the private sector, as well. Failure to pay final wages promptly, including unused vacation pay, may result in stiff penalties for California employers across the board, regardless of whether the employee quits, is discharged or retires.

“While there may well be a substantial amount of paperwork associated with a longtime employee’s retirement, the employer must be prepared, at a minimum, to pay the employee’s final wages no later than within 72 hours of the last day worked, even in the absence of advanced notice of the retirement,” Rodine said.

Rodine was not surprised by the court’s findings in this case. While the state’s attempt to parse the language in section 202 was linguistically defensible, Rodine said it strained credulity.

Not only did the court’s decision seem unsurprising based upon a natural reading of the labor code, but the policy behind section 202 seemed to necessitate the court’s findings, he said.

There are still differences between quitting and retirement, Rodine noted, even if the labor code treats them the same. For instance, differences remain in the types of benefits afforded to a retiring employee as opposed to one quitting.

In many cases, these benefits may be a function of time served at the place of employment rather than the circumstances surrounding the termination of that employment.

“But, as far as the California Labor Code is concerned, there is no difference between the employee who is given a gold watch on the last day of a lengthy career, and an employee that departs while uttering, ‘take this job and shove it,'" Rodine said.

Organizations in this Story

California Supreme Court
350 McAllister Street
San Francisco, CA 94102

Seyfarth Shaw LLP
131 S Dearborn St
Chicago, IL 60603

California Attorney General's Office
1515 Clay St
Oakland, CA 94612

Get notified the next time we write about any of these organizations!

More News