Employee can’t file theft suit for lost wages
Brett Voris helped two colleagues launch three real estate startups in 200506, then was fired in 2007 after accusing the pair of financial improprieties. He sued for wages he hadn’t been paid and won about $350,000 in damages, but couldn’t collect them from the companies because they were insolvent.
So Voris filed another suit accusing one of the partners, Greg Lampert, of draining the companies’ accounts through mismanagement and depriving him of wages by deliberately taking his property — “conversion,” in legal terminology. On Thursday, a divided California Supreme Court ruled that state law, at least as it stood when Voris sued, did not allow such a claim for lost wages.
In the 52 decision, Justice Leondra Kruger said employees who have been cheated out of
wages can ordinarily ask the state Labor Department to seek recovery or sue the employer for breach of contract, though those remedies would not help someone whose former employer was insolvent.
She said conversion, a concept that dates back to at least to 15th century English law, allows a claim for recovery of specific property that was wrongfully taken — lands, possessions, or “a specifically identifiable pot of money that already belongs to the employee” — but not for a debt defined only by its amount, like unpaid wages, and not by its source.
“A conversion claim is an awfully blunt tool for deterring intentional misconduct of this variety,” Kruger said. She said it can apply to “goodfaith mistakes” in employee compensation and can result in an award of punitive damages, in addition to compensation for the employee’s losses. Although punitive damages are limited to cases of “oppression, fraud or malice,” Kruger said, they have been awarded in “runofthemill wage suits” in other types of cases, and would probably be sought in suits like the current one if the court allowed it.
She also noted that the Legislature had subsequently passed a law that allows such suits to proceed against former company officers or managers in some such cases. The law took effect in 2016 and does not apply to Voris’ case.
In dissent, Justice MarianoFlorentino Cuéllar said the ruling was both mistaken and unfair.
“In California, unpaid wages are the employee’s property once they are earned and payable,” said Cuéllar, joined by Justice Goodwin Liu. He noted that Voris has been allowed to pursue a conversion suit for the lost value of his company stock, and said it made no sense to bar a similar suit for wage loss.
“For the workers who aren’t being paid what they earned, it hardly matters whether the nonpayment or underpayment was the product of deliberation or mistake,” Cuéllar said, noting that a successful conversion suit would also include payments for interest and attorneys’ fees.
The startups were called PropPoint, Liquiddium Capital Partners and Sportfolio. Voris’ attorneys said Liquiddium is still in business.
The ruling reflected a division on the court, with Kruger and Justice Joshua Groban, both appointees of former Gov. Jerry Brown, joining the three Republicanappointed justices in a majority that sided with managers over employees. Groban took office in January and has not yet written an individual opinion, and the case was an indication of where he might stand on disputed issues. Cuéllar and Liu were also appointed by Brown.
Robert Cooper, a lawyer for Lampert, said the court had properly refused to “inject tort remedies” — damage claims usually reserved for specific injuries — into disputes over employment contracts.
“Given the plethora of statutory remedies available in employment cases, adoption of plaintiff ’s view would have engendered significant obstacles in resolving such ubiquitous lawsuits,” Cooper said.
Edward Anderson, a lawyer for Voris, said the court “has said for years that wages are property.” Based on Thursday’s ruling, he said, that maxim no longer applies “if they’re stolen.”
“In California, unpaid wages are the employee’s property once they are earned and payable.” Justice MarianoFlorentino Cuéllar in dissent