The COVID-19 Pandemic Keeps Civil Claims Alive
While workers and businesses are focusing on addressing the immediate health and financial impacts of the COVID-19 virus, in California, the virus has another effect—keeping civil claims alive for the indefinite future. Civil claims live and die based upon statutes of limitation, but emergency rules adopted by the California Judicial Council currently toll the statutes of limitation on all civil claims in the State of California, extending the life of claims that would otherwise expire.
Civil Statutes of Limitations
Throughout the State of California, emergency orders shuttered courts to most litigants. To address difficulties posed by these local court closures, on April 6, 2020, the California Judicial Council approved 11 emergency rules which, according to Chief Justice Tani Cantil-Sakauye “preserve the rule of law and protect the rights of victims, the accused, litigants, families, and children, and all who seek justice.”
Under Rule 9 of these emergency rules, all civil statutes of limitations are tolled from April 6, 2020 until 90 days after Governor Newsom’s state of emergency declaration related to the COVID-19 pandemic is lifted. In other words, the deadline for the filing of all civil actions stopped running as of April 6, 2020, and will not begin running again until 90 days after the state of emergency declaration is lifted. As the emergency declaration depends upon a mix of political, economic, and health factors, it is impossible to say when the Governor will lift the state of emergency declaration and consequently when tolled civil claims will expire.
For example, all California employers face common threats from the Private Attorney General Act (PAGA) claims and wage and hour class actions made possible by California’s complex Labor Code. PAGA claims have a one-year statute of limitations, and class action claims typically have a three or four-year statute of limitations depending upon the type of claim asserted. Based upon the Judicial Council’s emergency rules, these statutes of limitations have ceased to run and are tolled until the Governor makes the political, economic, and public safety decision to lift the state of emergency.
Effects on the Construction Industry
In the construction industry, the impact of tolling will be felt the greatest regarding payment-related disputes at the end of projects which ordinarily have very short statutes of limitations. For example, a mechanic’s lien claimant must file suit within 90 days of having recorded the lien, claims based on a Stop Payment Notice may have a statute of limitations as short as 120 days, and claims against a general contractor for a subcontractor’s failure to pay wages under Labor Code section 218.7 must be brought within one year of completion of the project. Despite the important public policy behind these short deadlines, they too are tolled until 90 days after the state of emergency declaration is lifted.
For contractors and subcontractors, they must take note of these extended deadlines when releasing final payment or pursuing claims for payment at the end of a project. On projects where disputes have arisen, such as from the filing of a Stop Payment Notice by a subcontractor, final payment by the owner may be delayed indefinitely as statutorily the owner must hold the funds until the time for the claimant to file suit has expired. Similarly, where a contractor is withholding payment from a subcontractor based upon potential claims under Labor Code section 218.7, as a matter of risk management the contractor would be justified to continue withholding funds until the Governor lifts the state of emergency declaration and the statute of limitations expires.
It is important for all California businesses and employers to understand the ongoing exposure that tolled statutes of limitations can create, and not assume that their claims or the claims of adverse parties have expired.