In a landmark ruling by the California Supreme Court, employers in the Golden State have been found not subject to liability under a conversion theory based on non-payment of employees’ wages. The decision was handed down in a high-profile and long-running appeal in Voris v. Lampert on Thursday, August 15. This victory, obtained by Wilson Elser attorney Robert Cooper, marks one of the few pro-employer decisions issued by the California Supreme Court.
The employment case has been ongoing since 2007, when Brett Voris first sued his employer Greg Lampert for non-payment of wages. The two men had worked together for a year to launch three start-up ventures, partly in return for a promise of later payment of wages. However, the two fell out, Voris was fired and his promised compensation never materialized. The plaintiff sued the start-up companies and won, successfully getting both contract-based and statutory remedies for the compensation failure.
Voris did not stop there. He then went after Lampert, seeking to hold his former employer personally liable for the unpaid wages by arguing a theory of common law conversion. According to court documents, Voris claimed: “the companies converted his personal property to their own use and that Lampert [was] individually liable for the companies’ misconduct.”
However, Wilson Elser attorney Cooper argued that such a conversion claim was not cognizable. He told Insurance Business: “There are thousands of statutes in the California Labor Code that govern the relationship between employers and employees, and they define the penalties and remedies for violations of all sorts of employment laws. The plaintiff in this case was trying to bypass those laws, remedies and limitations set forth in the Labor Code by trying to get additional damages in the form of emotional distress and punitive damages, which are typically not allowed under the Labor Code.
“In order to maximize recovery, the plaintiff’s attorney was saying: ‘You should allow us to pursue a tort remedy so that we can get these additional damages,’ which are pretty powerful and potent in terms of exposing employers to additional liability, which is way above and beyond what the statute allows in terms of the employer’s exposure for non-payment on wages. The reason they were trying to bypass those remedies and increase the recovery by seeking punitive damages is that they could easily get seven figures if they can convince a jury that the employer had engaged in a certain form of conduct or misconduct.”
The California Supreme Court adopted Cooper’s view that employers are not subject to liability under a conversion theory based on non-payment of employees’ wages. While employees often pursue this theory to obtain punitive damages, emotional distress damages and other tort damages, with strong dissent, the majority opinion by the court rejected this theory for the first time. Instead, the majority held that given the plethora of statutory remedies available in employment cases, the tortification of contract-based wage claims was not legally justified.
“Under insurance law, if the allegation against the defendant or the business involves intentional conduct, there’s typically no insurance. But the unique thing about a conversion theory is that one could be held liable without having to show willful conduct or bad faith or intent. So, the insurance companies typically would not deny a conversion claim in duty to defend because conversion claims could be presented based on purely innocent conduct,” Cooper commented.
“If we had lost, there would have been significant negative consequences for the insurance industry in terms of the defense costs associated with these claims, because every time somebody files a lawsuit and presents a conversion claim, the insurance company would have a duty to defend the claim even if they don’t often have to pay it,” he added. “But in this case, because the Supreme Court has said there is no such claim [the conversion theory], plaintiffs attorneys will not plead it to begin with, so that significantly reduces the insurance companies’ defense costs.”