California Supreme Court Rejects Conversion Claim for Unpaid Wages

Can an employee sue his employer for unpaid wages by claiming that his employer and its principals “converted” his personal property to their own use, and that the principals are individually liable for the employer’s conduct? No, held the California Supreme Court in the recent case of Voris v. Lampert, (Cal S Court Case No. S241812), issued on August 15, 2019. 

The employee in that case, Brett Voris, sued his employer, Greg Lampert, for unpaid wages under the common law theory of conversion, based on Lampert’s alleged failure to pay him wages owed in helping him to set up a real estate investment company.  When no payment was made to Voris for his efforts, he sued in California state court claiming that Lampert “converted” his property for personal use and was liable to him for the value of the unpaid wages earned. 

In a 5-2 decision, the Court initially stated that a conversion claim must be based on the taking of a thing to which the plaintiff has right to possession, but that this does not typically apply to monetary claims for services rendered.  In finding that a conversion claim could not be brought for the withheld wages, the Court noted that there already exist extensive remedies for non-payment of wages, such as a breach of contract claim or a clam under the Labor Code that could be brought before the California Labor Commissioner.  The Court further noted that additional methods exist under state law for reaching a company’s principals for non-payment of wages, including seeking to hold them liable under a theory of “alter ego liability,” and that there are remedies under the Labor Code that are designed to directly punish and deter employers that fail to honor wage claims including the posting of a bond with the State as a condition to continuing to do business and obtaining a temporary restraining order to halt business operations.   Employers and individuals who fail to satisfy wage judgments can also face jail sentences of up to six months and are subject to stop orders and levies upon property or money to satisfy the debt.  

The Court noted that a cause of action for conversion of unpaid wages would “largely duplicate these remedies” and thereby serve little purpose, adding claims of potential “extra-contractual” and consequential damages such as emotional distress and punitive damages against employers for failing to honor a simple wage claim.  Although it admitted that such remedies could deter wrongful withholding wages, the Court concluded that a conversion claim is an “awfully blunt tool” to achieve that purpose, and that the claim could be extended to those who make good faith mistakes.  Accordingly, the Court stated that “we see no sufficient justification for layering tort liability on top of the extensive existing remedies demanding that this sort of error promptly be fixed.”  

The Court essentially concluded that the Legislature “has been attentive to the problem and that it is capable of studying the range of possible solutions” and fashion appropriately-tailored relief, without an additional cause of action for conversion being available whenever wages are wrongfully withheld.  Under these circumstances, the Court considered it unnecessary to “transform a category of contract claims into torts,” and to “pile additional measures of tort damages on top of statutory recovery, even in cases of good faith mistake.”  Therefore, although the Court reconfirmed that the “prompt payment of wages is of fundamental importance to the welfare of both workers and the State,” it determined that it is up to the Legislature to craft the remedies available to recover unpaid wages, and that the Court had no business fashioning a “conversion claim” to be added on top of the other available remedies for that conduct.

This AALRR presentation is intended for informational purposes only and should not be relied upon in reaching a conclusion in a particular area of law. Applicability of the legal principles discussed may differ substantially in individual situations. Receipt of this or any other AALRR presentation/publication does not create an attorney-client relationship. The Firm is not responsible for inadvertent errors that may occur in the publishing process. 

© 2019 Atkinson, Andelson, Loya, Ruud & Romo

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