The California Supreme Court recently held that the tort claim of conversion is not an appropriate vehicle for plaintiffs seeking recovery of unpaid wages. In Voris v. Lampert (Cal. 2019) Case No. S241812, the plaintiff brought suit against three start-up ventures and two individual defendants to recover wages which had been promised to the plaintiff but never paid. The operative complaint raised twenty-four causes of action including: breach of oral contract, quantum meruit, fraud, failure to pay wages in violation of the Labor Code, conversion, breach of the implied covenant of good faith, and breach of fiduciary duty. Although the plaintiff prevailed, his efforts to collect on his judgment were ostensibly frustrated due to the lack of funds and assets of the corporate defendants.
The plaintiff then focused upon the one remaining individual defendant in an attempt to hold him personally liable for the unpaid wages. While several of the plaintiff’s claims against the individual defendant were dismissed on demurrer and pursuant to a motion for summary judgment, the plaintiff focused on a potential claim against the individual defendant for wage conversion, which would have allowed him to both hold the individual defendant personally liable and recover punitive damages. In a series of two appeals to the California Court of Appeals, the appellate court, in a split decision, did not permit the plaintiff’s wage conversion claim against the individual defendant to proceed. The California Supreme Court granted review to address this disagreement and affirmed.
The California Supreme Court reasoned that “the conversion claim [plaintiff] asks us to recognize neither fits well with the traditional understanding of the tort, nor is well suited to address the particular problem he alleges.” Id. at 31. The Court further recognized the problem that allowing the plaintiff’s claim to proceed would cause: “A conversion claim for unpaid wages would reach well beyond those individual corporate officers who withhold wages to punish disfavored employees or who deliberately run down corporate coffers to evade wage judgments. As the Court of Appeal in this case observed, to recognize such a claim would authorize plaintiffs to append conversion claims to every garden-variety suit involving wage nonpayment or underpayment. The effect would be 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. In light of the extensive remedies that already exist to combat wage nonpayment in California, we decline to take that step.” Id.
The California Supreme Court’s well-reasoned approach and refusal to permit the conversion claim for unpaid wages to go forward is a win for employers. This decision eliminates an additional avenue of relief for plaintiffs, provides additional protection to both corporate officers and other entities, and prevents plaintiffs from seeking punitive damages when asserting conversion claims.