HR Management & Compliance

Wage and Hour: Is It Legal to Suspend an Employee Without Pay as a Form of Discipline?

QUESTION: My company often sends employees home without pay for various offenses, such as egregious dress code violations, insubordination, and slacking off. Sometimes, the employee is told to return the next day, and sometimes the suspension runs for a few days or more while we investigate. I wouldn’t want anyone to know I’m asking, but is it legal for us to do this? — Anonymous

overtimeANSWER: Yes. It is perfectly legal to suspend an employee as a form of discipline. It should be considered the same way as any other form of discipline, such as demotion, salary reduction, or termination. That said, suspensions take many forms. The easy one is a suspension without pay for a definite number of days after the conduct has been investigated and the decision has been made to suspend the employee. The employer determines how many days the employee will be on unpaid suspension and informs him or her. Both the employer and the employee know exactly how long the person will be out and unpaid, and when that employee will return to work. Although this is obviously subject to challenge, as is any adverse action, it is a perfectly appropriate and legal form of discipline.

Another form of suspension occurs when the employer is convinced that the employee has engaged in conduct that requires immediate removal from the workplace pending an investigation that may or may not lead to termination. To avoid any problems, some employers will suspend an employee with pay until the final decision is made as to whether the person will be terminated. Because the employee is still being paid, the suspension likely will not create any legal problems while the ultimate determination is under consideration.

The third type of suspension occurs when an employer wants to remove the employee from the workplace immediately and investigate to determine whether termination is appropriate, but does not want to pay the employee during the suspension. Because termination is fairly likely in this situation, the employer wants to suspend the employee without pay until a quick investigation is completed, just in case there are any mitigating circumstances. The issue that arises in this scenario is whether the suspension is actually a termination, and thus, under Labor Code Section 201, the employee would be entitled to be paid all wages due at the time of suspension. And, because all wages were obviously not paid at the time of suspension, there is the question of whether waiting-time penalties could be awarded under Labor Code Section 203.

In this context, a suspension without pay for a short period of time most likely will not trigger waiting-time penalties under Section 203. When, however, the investigation drags on and there is no set time limit for the length of the suspension, Section 203 penalties could be awarded. Although there are no hard-and-fast rules, open-ended suspensions that last beyond the end of a pay period and appear to have little relation to the amount of time the investigation required may well be considered de facto terminations, triggering the potential for waiting-time penalties.

When an employer suspends an employee without pay pending an investigation, the best practice is to ensure that the investigation is conducted as quickly as possible and to set definite timelines for how long the suspension will last. If the investigation takes longer than expected, the suspension can be extended—but, again, with a definite end date. However, even under this scenario, if the amount of time the employee is on suspension bears little or no relationship to the actual amount of time spent on the investigation, the labor commissioner may well consider it to have been a termination and thus award Section 203 penalties.

Lloyd W. Aubry, Jr., Esq., former California labor commissioner, is of counsel at the San Francisco office of the law firm Morrison & Foerster, LLP.