Dive Brief:
- The U.S. Court of Appeals for the 9th Circuit ruled on Sept. 22 that Hyatt Corp. wrongfully waited to pay out vacation time to employees who were temporarily laid off in March 2020 because of the COVID-19 pandemic.
- According to court documents, the court said the company’s decision to delay paying out vacation time until June 2020, when the employees were formally terminated, violated the prompt payment provisions of the California Labor Code.
- The ruling reverses the U.S. District Court for the Central District of California’s summary judgment in favor of Hyatt and remands the case back to the district court. Hyatt could not immediately be reached for comment.
Dive Insight:
Section 201 of the California Labor Code states: “If an employer discharges an employee, the wages earned and unpaid at the time of discharge are due and payable immediately.”
Given the law does not define “discharge,” the appeals court considered “whether a temporary layoff, with no specified return date, is a discharge for purposes of [Section] 201.” The court said it could not find any case law to answer that question, nor did any of the parties involved cite cases.
The appeals court turned to the California Division of Labor Standards Enforcement, a state agency that enforces California’s labor laws, for clarity. In an opinion letter and its policies and interpretations manual, DLSE establishes that “a temporary layoff without a specific return date within the normal pay period is a discharge that triggers the prompt payment provisions of Cal. Labor Code [Section] 201.”
Following that guidance, the appeals court ruled that “Hyatt thus should have paid the accrued vacation pay at the initial layoff in March 2020 because the temporary layoff was longer than the normal pay period and there was no specific return date.”
The appeals court noted that “Hyatt’s actions are understandable given the uncertainty during the early period of the pandemic,” but maintained that the March 2020 layoff was a discharge under Section 201 and the delayed payout of vacation time was in violation of the state law’s prompt payment provisions.
