How To Handle Various Termination Pay Issues in California

When an employee leaves your employment—with long notice or short, whether voluntarily or kicking and screaming—you need to follow a host of rules regarding final pay. Here are some tips for a few of the common situations you might encounter.

Employee Advances

If you advanced money to the employee before the employee leaving, you are permitted to deduct the unpaid payroll advances from the employee’s final paycheck. If the advance is unrelated to the employee’s wages, however, you are not permitted to deduct the unpaid advance.

Additional Money Owed To the Employee

Like unpaid wages, you must include any unpaid business expenses owed to the employee at the time of departure in his or her final paycheck. If the employee has not turned in an expense report and you are unaware of expenses owed by the company, you will not be in violation of the Labor Code for not paying these expenses at the time
of separation. If the employee later submits these expenses, however, be sure to promptly pay the unpaid expenses.

Termination pay in California—webinar next Tuesday! Learn more here.

Additional Monetary Benefits

Calculating final pay becomes more complicated when it concerns an employee who has a complicated pay structure, such as a senior executive, or someone who has been with the company for a long time. These situations may require complex calculations regarding the employee’s entitlement to additional monetary benefits, such as bonuses, retirement plans, and deferred compensation plans.

To properly determine these amounts, you will need to look at all applicable contractual arrangements between the company and the employee, as well as be familiar with federal and state laws that may apply.

Calculating bonuses can be tricky depending on the language of your contract with the employee or the language of other applicable company policies. Because the terms of such contracts and policies vary greatly, it is difficult to provide precise instructions for calculating bonuses.

If the contract language is clear regarding when the bonus vests and what must be paid to the departing employee, be sure to follow the contract terms precisely. If you have any doubt regarding how much should be paid, when it must be paid, or whether the departing employee is entitled to a bonus at all, consult with an attorney for clarification.

As for retirement plans and deferred compensation plans, terminations and layoffs typically trigger certain obligations under the plan terms. To determine the proper amounts, start with the terms of the contract and then contact the plan administrator for additional guidance.

Final Pay in California: 7 Common and Costly Mistakes You Could Be Making Right Now

 
Whether an employee quits unexpectedly, or departs after a well-planned termination process, the clock is ticking on the delivery of the person’s final pay. And it’s not just the timing of the final paycheck you need to worry about — you also need to be wary of things like the deductions you can and can’t make, questions regarding unemployment claims, and more.

It takes just one employee to launch a devastating wage and hour class-action lawsuit against your company. Even if you win, you could be facing hundreds of thousands of dollars in defense costs alone, not to mention the time you can never get back and the potentially irreparable damage to your company’s reputation.

Don’t take a chance. Join us for this webinar on October 2, and learn about some of the more common and costly mistakes California employers make with employee final pay.

You’ll learn:

• The 7 key mistakes California employers make over and over regarding employees’ final pay — and how to avoid them
• The deadline for giving a final paycheck to a departing employee
• Whether unused accrued vacation time must be paid as part of the final paycheck
• Whether to include pay for unused accrued sick time or PTO in the final paycheck
• Whether it matters if an employee terminates voluntarily or involuntarily for final pay purposes
• If you can withhold final pay until the departing employee returns the company laptop, smartphone, or other company-owned equipment
• If you can take a balloon payment from final pay for employees who terminate with outstanding company loans
• Potential penalties you face if you don’t follow the California Labor Code rules for issuing the final paycheck
• Whether it’s considered a best practice to contest all unemployment insurance benefit applications by former employees

In just 90 minutes, you’ll learn about some of the most significant do’s and don’ts for managing final pay in California. Register now for this informative event risk free.  

Download your free copy of Paying Overtime on Bonuses: A Calculation Guide today!