Final pay in California has very strict requirements. It’s not as simple as just paying the departing employee on their next scheduled pay date, and there are penalties for getting it wrong. Employers in California need to understand the final pay requirements and understand their obligations, regardless of whether the employee resigns or is terminated. Have a plan in place to get it right to reduce the chance of penalties or lawsuits.
First, let’s look at terminations. According to the California Labor Code, “employers in California must pay all wages due and owing immediately upon termination.” Michelle Flores explained in a recent CER webinar. This is clearly outlined in Labor Code section 201: “if an employer discharges an employee, the wages earned and unpaid at the time of discharge are due and payable immediately.” In other words: give them the check on the day of termination.
Employers should also review California Labor Code sections 200-243, which deal with the intricacies of employer responsibilities around final paychecks.
Resignations do offer the employer some leeway. But not every employee gives the same amount of notice. From the employee standpoint, two weeks’ notice may be the norm, but “there is no statutory requirement for an employee to give notice.” Flores reminded us. The law tells us what to do in any case:
“Employers have 72 hours to get their ducks in a row when an employee resigns. So if the employee gave less than 72 hours’ notice that they’re going to be leaving, an employer has the remaining balance of the 72 hour allotment to get the final payment to the employees.” Flores explained. “If they gave you two weeks’ notice, however . . . you have to pay them their wages due and owing on their last day.”
Final Pay in California: What if You Don’t Pay on Time?
What if you can’t pay in time (either on the day of termination or within 72 hours of their resignation)? Unfortunately the penalties start adding up immediately. Waiting time penalties are outlined in California Labor Code section 203:
“For each day an employee must wait for an employer to pay wages that are due and owing to that employee, the employer will owe the employee his or her ‘daily rate’ of pay for each day wages are due but not paid, to a maximum of 30 days. This includes Saturdays and Sundays.” Flores told us.
For example, if an employer terminates someone on a Friday but waits to pay him or her until Monday, then the employer must pay that person an extra 3 days of pay due to the waiting time penalties. It is very rare that there will be exceptions to this. More likely than not the failure to pay will be deemed to trigger these waiting time penalties, and they add up very quickly. Be sure to get your ducks in row when making a termination decision, and have a plan in place to ensure an employee who resigns still gets their final paycheck in time.
The above information is excerpted from the webinar “Final Pay Obligations in California: Tips for Minimizing Your Legal Risks When Employees Leave.” To register for a future webinar, visit CER webinars.
Michelle Lee Flores is a partner in the Los Angeles office of Fisher & Phillips LLP. She focuses her practice on all aspects of employment litigation including jury and bench trials; arbitration; mediation and pre-litigation negotiations; sex, race, religion, age and disability harassment and discrimination; wage and hour violations including class actions; and wrongful termination.