Barnhill v. Robert Saunders & Co

In Barnhill v. Robert Saunders & Co. (1981) 125 Cal. App. 3d 1, the issue was whether to impose the waiting time penalty contained in Labor Code section 203 where the employer believed in good faith that it had a right to set off the employee's wages against amounts owed to the employer on a promissory note. The court concluded that the employer was mistaken, and that the wages were exempt from set off. Nevertheless, it refused to award the penalty because the law was uncertain in that "several Courts of Appeal had expressed the view that setoffs against employees' wages were proper . . . ." (Id. at p. 8.) Given that uncertainty, "the employer should not be penalized for believing that setoff was proper and payment of wages not required." (Ibid.) The employee was owed wages upon her discharge but she owed the employer on a debt she incurred. The employer exercised its right of setoff against the employee's wages, bringing the amount due to the employee to zero. The court held the employer did not have a right of setoff and was therefore liable to the employee for wages due at the time of her discharge. Nevertheless, because the question of setoff was one of law and the law was not clear at the time of the employee's discharge, the employer's good faith belief he had a right of setoff negated a finding his nonpayment of wages was willful within the meaning of section 203. ( Id. at pp. 8-9.))