Final pay rules in California: Understanding the waiting-time penalty

What is the waiting-time penalty? Under California Labor Code Section 203, employers will be assessed a penalty for any willful failure of on-time payment of any part of final wages due to a departing employee. Remember that wages earned are due and payable immediately upon discharge for involuntary terminations. For resignations with at least 72 hours notice, the final paycheck is due at the time of quitting. For resignations without at least 72 hours notice, the final paycheck is due no later than 72 hours after quitting. This is where the time clock begins for waiting-time penalties on the final pay in California.

“If you willfully fail to pay exiting employees their earned and unpaid wages that they’re owed within the time deadlines that we’ve discussed, you are liable for one full day’s wage for each day that the former employee isn’t paid, up to a maximum of 30 days. That’s called the waiting time penalty.” Barrie Gross explained in a recent CER webinar. “Basically, your willful failure to give them their final pay when due means that their daily wage continues to accrue for up to 30 days.”

Final Pay Rules in California: Understanding the Waiting-Time Penalty

If this situation sounds frightening, it should. These wages accrue very quickly. “The amount of the penalty is not related to the amount of the underpayment. What does that mean? It means that if you underpaid wages by $1, and you didn’t pay them that $1 for 32 days, then you’d owe 30 days of penalty, calculated at the full, regular, daily rate—and that’ll end up being the same as about 6 weeks of wages.” Gross explained.

The penalty doesn’t apply just to the final wages for the final work period; it also applies if the underpayment in the final wages was due to an underpayment that was made months or years previously that wasn’t properly rectified in the final paycheck.

The calculation is pretty straightforward: first calculate the employee’s daily rate of pay, then multiply the daily rate by number of days after the due date that wages were not paid (up to max of 30 days). These days are calendar days – not work days – so they include weekends, holidays, etc. When employers are calculating this penalty, remember that since waiting time penalties are not wages, there’s no taxes or withholdings. It’s easy to see the importance of getting the accurate final paycheck to a departing employee on time!

The above information is excerpted from the webinar “Final Pay in California: 7 Common and Costly Mistakes You Could Be Making Right Now.” To register for a future webinar, visit CER webinars.

Barrie Gross is the founder of Barrie Gross Consulting, a human resources consulting and training firm dedicated to the ongoing management and development of human capital. Ms. Gross is a recognized expert in HR and talent management strategies.