HR Management & Compliance

Final pay obligations in California: Payment timing and penalties

Final pay laws are strict in some states, and the penalties add up very quickly for employers who do not pay in time. With the clock ticking to deliver that final paycheck, it’s crucial for employers to understand their obligations so they can stay in compliance. The best way to avoid costly errors is to have a plan in place for employee resignations and terminations long before an employment relationship ends.

Timing of final pay in California

“Voluntary resignation and involuntary termination are treated differently when it comes to final pay issues.” Nicole A. Legrottaglie explained in a recent BLR webinar. “The general rule for California employers is that: a California employer who discharges an employee must immediately pay the employee all wages he has earned.”

On the other hand, if an employee who does not have a written agreement for a definite period of employment quits without giving prior notice, his employer must pay his wages within 72 hours. If an employee gives at least 72 hours notice of his intention to quit, his wages must be paid at the time of quitting.

Final pay obligations: Potential waiting time penalties

“An employer who willfully fails to pay any wages of a terminated employee, without abatement or reduction, within the time specified may be assessed waiting time penalties in accordance with California Labor Code section 203.” Legrottaglie advised. If the penalties are assessed, the employer will owe an amount in addition to the unpaid wages equal to the employee’s daily wages (at the rate in effect when payment was due) for each day the wages remain unpaid until an action is commenced for the wages. The penalties will not exceed 30 days’ pay.

The Division of Labor Standards and Enforcement (DLSE) is the California regulatory agency established to enforce labor code statutes and handle wage claims. The DLSE regulations state that a violation will be considered “willful” (and thus be subject to the penalty just outlined) if an employer intentionally fails to pay wages to an employee when those wages are due. On the other hand, the employer has the ability to dispute this with a good faith dispute. The regulations state that a good faith dispute that any wages were due could prevent a finding that a failure to pay was willful (and thus could preclude the imposition of waiting time penalties under Section 203). However, this dispute may or may not be successful with the judge.

For more information on sending an employee’s final pay on time without penalties, order the webinar recording of “Final Pay: Understanding Your Rights and Obligations When the Employment Relationship Ends.” To register for a future webinar, visit CER webinars..

Nicole A. Legrottaglie is an attorney in the Sacramento office of Carothers DiSante & Freudenberger LLP. She defends her clients in a broad range of employment claims, including claims of discrimination, retaliation, harassment, wrongful termination, ADA/FMLA compliance, wage and hour, contract disputes, and unfair business practices.

Leave a Reply

Your email address will not be published. Required fields are marked *