By Jeremy Mittman and Stephen Franz
Last week, the California Supreme Court ruled that a former start-up employee could not hold his former boss personally liable for unpaid wages based on the theory of common law conversion. Conversion is a legal term for theft. This is a win for employers as, if the Court had ruled otherwise, employers potentially could be held liable for tort damages (including punitive damages) for failing to pay wages.
In the case, Voris v. Lampert, the plaintiff, Voris, had worked alongside the defendant, Lampert, to launch three start-up ventures, partly in return for a promise of later payment of wages. After a falling out, Voris was fired and was never paid. He sued the companies and won on his claims for non-payment of wages under the California Labor Code and based on contract. Voris claimed he was unable to collect the monies he won because the companies did not have sufficient assets to pay. He then brought suit against Lampert individually, seeking to hold him personally responsible for the unpaid wages on a theory of common law conversion. Voris claimed that, by failing to pay the wages, the companies converted his personal property to their own use and that Lampert was individually liable for the companies’ misconduct. The Supreme Court ruled 5-2 that a conversion tort was not the “right fit” for the wrong that Voris alleged.