In a recent case involving Hyatt, the 9th Circuit Court of Appeals has ruled that the company violated California labor law by failing to promptly pay out vacation time to its laid-off employees. The court’s decision comes after it found that Hyatt’s decision to delay payment until June 2020, when the employees were formally terminated, was in violation of the prompt payment provisions outlined in the California Labor Code.
Violation of California labor law
According to court documents, the California Labor Code requires employers to promptly pay out vacation time to employees upon termination. The court determined that Hyatt’s delay in paying out vacation time to its laid-off employees was a direct violation of this provision. The court’s ruling reverses the summary judgment previously granted in favor of Hyatt by the U.S. District Court for the Central District of California and remands the case back to the district court for further proceedings.
Defining ‘Discharge’
One of the crucial aspects considered by the appeals court was the definition of ‘discharge.’ Given that the law does not explicitly define this term, the court sought clarity on whether a temporary layoff, with no specified return date, would qualify as a discharge under Section 201 of the California Labor Code. Interestingly, the court found no existing case law or cited cases that provided clear guidance on this matter.
DLSE Opinion and Guidance
In the absence of relevant case law, the appeals court turned to the California Division of Labor Standards Enforcement (DLSE) for guidance. The DLSE, through an opinion letter and its policies and interpretations manual, stated that a temporary layoff without a specific return date within the normal pay period would be considered a discharge, triggering the prompt payment provisions of the California Labor Code.
Ruling based on DLSE guidance
Relying on the DLSE’s interpretation, the appeals court concluded that Hyatt should have paid accrued vacation pay to its employees during the initial layoff in March 2020. As the temporary layoff exceeded the normal pay period and had no specified return date, the court ruled that the delayed payout of vacation time was a violation of the state law’s prompt payment provisions.
Acknowledging Pandemic Uncertainty
While acknowledging the challenging circumstances faced by businesses during the early period of the pandemic, the appeals court emphasized that Hyatt’s actions, although understandable, did not absolve the company from the violation. The court maintained that the March 2020 layoff qualified as a discharge under Section 201 of the California Labor Code, and therefore, Hyatt was obligated to promptly pay out the accrued vacation time to its employees.
Hyatt’s response
As of now, Hyatt has not issued an immediate comment or response to the court’s ruling. It remains to be seen how the company will address the violation of California labor law.
The recent ruling by the 9th Circuit Court of Appeals has found Hyatt in violation of California labor law for failing to promptly pay out vacation time to its laid-off employees. The court’s decision reverses the previous summary judgement in favor of Hyatt and emphasizes the importance of complying with the prompt payment provisions outlined in the California Labor Code. While the court acknowledged the challenges posed by the pandemic, it maintained that the delay in vacation time payout was a violation of the law. This ruling serves as a reminder to employers to adhere to labor laws and promptly compensate employees for their accrued benefits upon termination.