Employers in California who do not pay their workers lawfully are exposed to even greater liability than they may think. In Phillips v. Gemini Moving Specialists, the employee filled a company truck with the wrong type of gasoline, and the employer had to pay $70 to tow the vehicle and, presumably, an additional amount to have the vehicle drained of gasoline and refueled. The employee agreed verbally to pay for half the towing expense ($35), but requested that the money not be deducted from his next paycheck, as his rent was coming due. The employer nevertheless deducted $93.75 from the employee’s next paycheck. The employee never gave the employer written authorization for the deduction. California law requires that the employer obtain written authorization to make such a deduction. The employee complained about the deduction and was terminated shortly thereafter.
The Phillips court held that an employee who was terminated in retaliation for complaining about an unlawful wage deduction could sue for wrongful termination in violation of public policy; a claim which, if proven, could potentially expose the employer to thousands, if not millions of dollars of liability. The Phillips court also held that prompt payment of wages is a fundamental public policy of the State of California.
The practical impact of the Phillips case is that employers are now exposed to significantly more liability than they may think for wage and hours law violations where the employee is terminated. Phillips reveals that even a minor violation of a wage and hour rule most employers do not even know can expose the employer to potentially limitless liability.
In my experience, employees who have issues with their paychecks often complain about it. The proximity in time between the complaint and the termination may lead a judge or jury to believe the termination was retaliatory. The best way to avoid such lawsuits is to comply with the wage and hours laws to begin with, lest a $93.75 mistake end up costing thousands of dollars.
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