Yesterday, we looked at the rules for final pay in California, including the deadlines by which you must pay employees who are leaving either voluntarily or involuntarily. What happens if you miss those deadlines?
‘Willful’ Failure To Pay
An employer that “willfully” fails to pay an employee all of his or her final compensation within the time set by law for payment automatically owes the employee a waiting time penalty for each additional day the employee must wait to receive the final paycheck, up to a maximum of 30 days.
The word “willfully” in this context simply means that the employer did not pay the wages on time, and that the failure was not the result of an inadvertent error, such as that the employee’s check accidentally fell behind the file cabinet or was sent to the wrong address.
Also, an employer’s inability to pay final wages due to an employee—for example, due to a lack of funds—is still a willful failure to pay. However, if there is a good faith dispute that any wages are due, waiting time penalties will not be imposed.
A “good faith dispute” that any wages are due occurs when an employer presents a defense that, if successful, would preclude the employee from recovering any of the wages the employee claims are owed. Займы физическим лицам Липецк и область.
Thus, if you know that the employee is owed some wages, but dispute that the employee is entitled to other wages that the employee claims he or she is due, you must pay the employee the amount you agree is owed to avoid paying waiting time penalties. In this case, you do not have to pay the disputed wages in the final paycheck.
Final pay in California—webinar this Thursday!
But caution is required in asserting that there’s a good faith dispute about whether wages are owed because an employer’s ignorance of the law, or mistaken understanding of what the law requires, does not amount to a good faith dispute.
Calculating the Waiting Time Penalty
If you don’t pay all final wages on time, the waiting time penalty owed to the departing employee is calculated as follows:
Assume the employee earns $16 per hour and receives her final pay 10 days late.
$16 per hour x 8 hours per day = $128 per day x 10 days = $1,280 owed to the employee as waiting time penalties.
If the number of hours an employee works per day varies, the employer is required to average the employee’s hours to determine the actual daily wage, rather than using a standard eight-hour workday to calculate the employee’s daily rate.
Although there is no single approved method for how the average should be calculated, a reasonable approach would be to use the hours worked by the employee during the previous 30 days.
Final Pay in California: The Rules You Need To Know for Both Resignations and Terminations
Whether it’s a sudden resignation or a zero-tolerance immediate discharge, the clock is ticking on the employee’s final paycheck. And if you get it wrong, you can face stiff penalties under California’s Labor Code.
You also need to make sure you’re prepared for other various “last pay” considerations, including severance and questions regarding unemployment claims.
It can take just one disgruntled parting employee to represent a class of similarly situated individuals and initiate a wage/hour class action that could devastate your company. So it’s worth your while to make sure your final pay procedures are up to date and in order.
Participate in our interactive and timely webinar this Thursday, April 5th, and learn:
- When wages must be paid when you terminate an employee in California
- When wages must be paid when the employee resigns
- The types of waiting-time penalties you could be subject to for failing to adhere to California’s Labor Code
- How to properly calculate the amount of vacation pay, sick leave pay, and commissions owed upon separation of employment
- The limitations California law places on your ability to hold back pay following loans to employees or damage to (or failure to return) company property
- How to enforce a reimbursement agreement
- What to do if the employee claims you still owe additional money
- The three documents every California employer should include with the final check
- Severance pay pointers—including the types of claims you’re simply not allowed to have an employee waive
- When you should consider contesting a claim for unemployment, and when you should consider not responding
- Pre-termination best practices so you can minimize surprises
- Proper documentation of performance, discussions, tardiness, absences, and other issues
- Whether it’s ever better to give an employee a chance to resign instead of terminating the person
- Effective strategies for conducting productive exit interviews
- The game plan to follow when you’ve got a problem employee on your hands
- Why you should designate an official point of contact for all former employees
In just 90 minutes, you’ll learn everything you need to know about properly administering final pay in California. Register now for this important event risk-free.
Download your free copy of
How To Survive an Employee Lawsuit: 10 Tips for Success today!