13 Cal. App. 5th 1000
Cal. Ct. App. 5th2017Background
- Plaintiff Nathan Minnick worked for defendants Automobile Creations, Inc. and Dynamic Auto Images, Inc. for ~6 months and was terminated before his first anniversary.
- Employer written vacation policy stated employees "earn 1 week of vacation after completion of one year service" and expressly said employees do not accrue 1/12th of that week during the first year; accrued unused vacation is paid at termination.
- Defendants did not pay Minnick any vacation wages at termination because he had not completed one year.
- Minnick sued individually and on behalf of others, alleging failure to pay earned vacation wages under Labor Code §227.3, unfair competition, and PAGA penalties.
- Trial court sustained defendants’ demurrer without leave to amend, finding the policy lawful under controlling authority; Minnick appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether an employer may impose a waiting period before vacation accrues | Minnick: Suastez forbids contractual forfeiture of vacation and thus accrual must begin immediately | Defendants: Policy clearly imposes a lawful waiting period; no accrual (hence no vesting) in first year | Court: Employer may lawfully set a waiting period; policy not unlawful |
| Whether the policy unlawfully forfeits vested vacation | Minnick: Completing the first year is a forbidden condition resulting in forfeiture | Defendants: Nothing vests during first year because no vacation is earned then | Court: Forfeiture rule applies only to vested vacation; nothing vested because no accrual in first year |
| Whether the policy is ambiguous such that extrinsic evidence should be allowed | Minnick: Policy could be read to condition pay on anniversary; evidence of employer practice shows contrary application | Defendants: Policy is unambiguous; demurrer considers pleaded facts not extrinsic evidence | Court: Policy unambiguous as written; extrinsic evidence not grounds to avoid demurrer |
| Whether leave to amend should have been granted | Minnick: Could allege facts about employer’s application/second-year practices or deponent statements showing different intent | Defendants: No plausible facts could change that no accrual occurred in first year | Court: Minnick failed to identify facts that would cure defect; denial of leave proper |
Key Cases Cited
- Suastez v. Plastic Dress-Up Co., 31 Cal.3d 774 (Cal. 1982) (vacation pay vests as it is earned and vested vacation cannot be forfeited)
- Owen v. Macy's, Inc., 175 Cal.App.4th 462 (Cal. Ct. App. 2009) (employer may lawfully impose a waiting period before vacation accrual; no forfeiture if nothing was earned during waiting period)