Ninth Circuit's Ruling Protects Workers During Furloughs and Temporary Layoffs

A recent decision from the Ninth Circuit Hartstein v. Hyatt Corporation (9th Cir. 2023) 82 F.4th 825 strengthened worker protections when employers enact furloughs or temporary layoffs. When an employer furloughs or lays off employees and does not provide a specific return-to-work date within the same pay period, the employees must be paid all earned wages, including accrued vacation time, immediately.

The case stems from Hyatt Corporation's decision to temporarily lay off employees in March 2020 due to pandemic-induced business slowdown.  Hyatt told the employees that it hoped business would return to normal in eight to twelve weeks.  Hyatt also told the employees that they would continue to receive health benefits, that they could request accrued vacation pay, and that they were not separating their employment at the time.  In June 2020, however, Hyatt informed employees that their employment was terminated and that they would be paid all unused accrued vacation pay.  Hyatt’s failure to offer employees a predetermined return-to-work date in March 2020 prompted the Ninth Circuit to examine whether the Hyatt’s March 2020 temporary layoff should be classified as a "discharge" under California law, thereby triggering the obligation for immediate payment of all earned wages, including accrued vacation time at the time of the purported temporary layoff. Although the trial court initially favored Hyatt, the Ninth Circuit overturned the decision.

In its ruling, the Ninth Circuit endorsed the stance of the California Division of Labor Standards Enforcement (DLSE) that laying off employees without a specified return date within the pay period mandates the prompt issuance of final paychecks.

This ruling is a big win for employees because employers must promptly issue final paychecks when initiating furloughs or temporary layoffs without a designated return-to-work date, including accrued vacation. The decision may also help employees facing holiday shutdowns or blackout periods.

For questions regarding protected concerted activity or other related conduct, contact your labor law counsel.

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