Privacy, Business and Law

The California Supreme Court recently decided a case that has major implications for employers facing an unfair business practice claim brought under section 17200 of the California Business and Professions Code.Cortez v. Purolator Air Filtration Prods. Co., 23 Cal. 4th 163 (2000).
Rosalba Cortez, alleged that Purolator had engaged in unlawful business practices by failing to pay its employees overtime wages and sought restitution of the unpaid compensation.The district court entered a judgment in favor of Cortez, ordering Purolator to pay her unpaid overtime wages.

Purolator appealed, arguing that while California unfair business practice law permitted restitution, the law did not authorize recovery for damages. It contended that a claim for unpaid wages in any form was a claim for damages, and thus not available under that particular law. However, the court of appeals rejected this argument, stating that the unpaid wages did not constitute damages because Cortez was only seeking disgorgement of wages that Purolator had unlawfully withheld. Thus, the court of appeals ordered disgorgement of the wrongful benefit to the employer, namely the unpaid compensation. The California Supreme Court granted review to determine whether the disgorgement of unpaid wages constituted an award of damages or merely restitution.
In deciding the issue, the California Supreme Court stated that an unfair business practice claim is equitable in nature; thus, the statute allows a court to fashion remedies to prevent unfair business practices, including injunctions and orders that are necessary to prevent practices that constitute unfair business practice or to restore to persons any money or property acquired through wrongful business practices. Thus, because a court has broad power to restore the status quo ante in order to accomplish justice between the parties, the California Supreme Court held that the statute permitted an order compelling a defendant to pay back wages as a restitutionary remedy:

The employer has acquired the money to be paid by means of an unlawful practice that constitutes unfair competition as defined by section 17200. . . . The commonly understood meaning of ‘restore’ includes a return of property to a person from whom it was acquired, but 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.

Then the California Supreme Court adopted a four year statute of limitations for all claims brought under the state’s unfair business practices/competition laws, even if those claims are borrowed from another statute. In its discussion, the California Supreme Court held that any business act or practice that violates the Labor Code through failure to pay wages is by definition an unfair business practice. Therefore, even if the action to recover wages were barred by the statute of limitations if brought under the Labor Code, the plaintiff can still proceed under the unfair business practice statute, which has a longer statute of limitation period.
This case subjects employers to liability under California the unfair business practice statue for unlawfully withheld wages, including unpaid overtime. It allows one employee to recover as restitution on behalf of all victims that can be found, even if the other employees are not parties to the lawsuit. And the case essentially lengthens the statute of limitations period for claims based on Labor Code violations.