When Lisec v. United Airlines, Inc. (1992) 10 Cal.App.4th 1500, came before the court in 1992, there was little additional decisional guidance on the scope of "wages" as defined in the tax statutes.
The plaintiffs, who had prevailed on their wrongful termination claim, obtained an award of contract damages that included backpay and front pay. (Lisec, supra, 10 Cal.App.4th at pp. 1501-1502, 1504.)
Their former employer withheld payroll taxes, claiming the award constituted wages under federal and state law. (Id. at pp. 1501-1502.)
When the plaintiffs maintained the judgment was not satisfied, the employer moved for an acknowledgment of satisfaction of judgment, as permitted by section 724.050.
Section 724.050, subdivision (d), provides in relevant part: "If the judgment creditor does not comply with the demand to file an acknowledgment of satisfaction of judgment within the time allowed, the person making the demand may apply to the court on noticed motion for an order requiring the judgment creditor to comply with the demand. ... If the court determines that the judgment has been satisfied and that the judgment creditor has not complied with the demand, the court shall either (1) order the judgment creditor to comply with the demand or (2) order the court clerk to enter satisfaction of the judgment."
The trial court denied the motion, finding the employer lacked statutory authority to unilaterally reduce the judgment by withholding taxes. (Lisec, at pp. 1503, 1507-1508.)
In affirming the decision, the Court of Appeal distinguished Nierotko and Ainsworth on the basis that the employees in those cases were reinstated. (Lisec, supra, 10 Cal.App.4th at p. 1507.)
It observed the damages awarded to the plaintiffs did not redress deprivation of compensation earned or due for services already performed within the context of an ongoing employment relationship. (Ibid.)
In the absence of such a relationship, the court held the award did not constitute remuneration for services performed, and thus was not wages for purposes of withholding. (Ibid.)