Opinion ID: 6335029
Heading Depth: 2
Heading Rank: 2

Heading: availability of good-faith defense

Text: At the threshold, Hill argues that Walmart is foreclosed from raising a good-faith defense based on mistakenly classifying an employee as an independent contractor. We disagree. HILL V. WALMART 9 To reiterate, “a good faith dispute that any wages are due will preclude imposition of waiting time penalties under [§ 203].” 8 C.C.R. § 13520. Hill argues that this defense does not apply here because it requires “a good faith dispute that any wages are due” under § 203, and Walmart does not dispute that some wages are due; Walmart just disputes when those wages are due. That argument fails. Although neither party raised this point, “wages” and “payment” are not necessarily the same thing under the California Labor Code. For purposes of the statutes involved here, “wages” are specifically defined as “all amounts for labor performed by employees.” Cal. Lab. Code § 200(a) (emphasis added) (applying this definition to “this article,” meaning Cal. Lab. Code §§ 200–244); see also id. § 203(a) (referring to “wages of an employee”). So, while there is no dispute that Walmart had to pay Hill, Walmart’s contention that Hill is an independent contractor necessarily conflicts with the idea that there were “any wages due” within the meaning of § 203 or 8 C.C.R. § 13520. Moreover, 8 C.C.R. § 13520 explains that “[a] ‘good faith dispute’ that any wages are due occurs when an employer presents a defense, based in law or fact which, if successful, would preclude any recovery on the part of the employee.” Id. It is undisputed that if Hill were an independent contractor, then she would not be an “employee” entitled to an immediate payment of wages upon discharge pursuant to Labor Code § 201(a) or to recover penalties from Walmart pursuant to § 203. Consequently, Walmart’s argument that Hill was an independent contractor is a “good faith dispute that any wages are due.” See also Amaral v. Cintas Corp. No. 2, 163 Cal. App. 4th 1157, 1202 (2008) (employer had good-faith defense because its “legal 10 HILL V. WALMART obligations” were “unclear,” and the arguments it made for its ultimately incorrect legal position were not “unreasonable or frivolous”); Barnhill v. Robert Saunders & Co., 125 Cal. App. 3d 1, 8 (1981) (legal ambiguity is a valid basis for a good-faith defense). Along more general lines, Hill also argues that allowing a good-faith defense here would reward ignorance of the law and undermine § 203’s role in incentivizing timely payment of wages. But the fact that § 203 only punishes “willful” conduct suggests that the legislature only intended to impose penalties on employers who lack a good excuse for withholding payment to discharged employees. See, e.g., Amaral, 163 Cal. App. 4th at 1202 (employer’s failure to pay timely wages was not willful because it arose out of a mistake of law that was not “unreasonable or frivolous”). An important rationale behind allowing a good faith defense in this context is to prevent employers from being “penalized” in genuine cases of “uncertainty.” Barnhill, 125 Cal. App. 3d at 8; see also Amaral, 163 Cal. App. 4th at 1201 (“Barnhill’s holding was memorialized in [8 C.C.R. §] 13520.”). So, to the extent that Walmart has raised such an ambiguity about Hill’s employment status, allowing a good-faith defense here amply serves the balance struck by the applicable statutes and regulations between incentivizing prompt payment of wages and shielding innocent mistakes from penalties. For these reasons, we conclude that a good-faith mistake about a worker’s employment status is a defense to the imposition of waiting-time penalties pursuant to § 203. 1 1 We observe that this holding is consistent with the apparent consensus view among federal district courts in California. See, e.g., HILL V. WALMART 11