Final Pay Explained for Employees Working in CA

Final Pay is Due at Time of Discharge. The California Labor Code requires that Employees receive all earned and unpaid wages (to include accrued and unused vacation/PTO) at the time of termination from employment, regardless of length of employment or reason for termination from employment. This is an area where Employers unknowingly put themselves at risk… but after you read this you will know. The HR consulting company of PLB Resources is in the business of helping Employers with what they know they don’t know.

Failure to comply with final pay requirements in California may result in an assessment of waiting time penalties up to 30 calendar days at the rate of the employee’s wages per calendar day, plus other possible fines and future restrictions that may affect your business.

The time requirement for a final paycheck depends on if the Employee:

• Quit without notice (voluntary), or
• Quit with at least 72-hours’ notice (voluntary), or
• Was terminated or laid off (involuntary)

VOLUNTARY SEPARATION FROM EMPLOYMENT

Less Than 72-Hours’ Notice from Employee

If an Employee quits with less than 72-hours’ notice, you must pay all wages and accrued, unused vacation/PTO within 72 hours after notice is given.

An Employee who gives less than 72-hours’ notice is entitled to receive his or her final wage payment by mail ONLY IF he or she so requests in writing with an updated mailing address. For purposes of such an authorized mailed final payment, the 72-hour requirement is met if the postmark is within the 72 hour deadline. Unless the Employee who quit specifically requests payment by mail, you may hold his or her final paycheck until it is picked up.* Mailing the final paycheck without a request (written) to do so could subject the Employer to waiting time penalties.

72 Hours or More Notice from Employee

If an Employee quits with 72-hours’ notice or more (such as, but not limited to, a typical two week notice), you must pay all wages and accrued and unused vacation/PTO on the last day of work.

Quitting/resigning Employees who provide at least 72 hours’ notice are entitled to be paid on their last day of work, at the office or agency of the Employer in the county where the Employee has been working.

NOTE: Retirement, for the purpose of final payment, is considered a voluntary quit and the 72 hour rule continues to apply.

INVOLUNTARY SEPARATION FROM EMPLOYMENT

If you terminate an Employee or lay him or her off with no specific return date within the normal pay period*, all wages and accrued, unused vacation/PTO earned are due and payable immediately. It is unlawful to wait until the next regular payday to pay an Employee that you have terminated or laid off; significant financial penalties may apply.

Likewise, it is unlawful to withhold a final paycheck until the Employee:

• Returns tools, uniforms, mobile devices, laptop computers, keys or any other items belonging to you.
• Pays back money that he or she owes to you.
• Turns in expense reimbursement forms.

*If there is a layoff with a return to work date within the pay period and the Employee is scheduled to return to work, you can pay the wages at the next regular payday.

NOTE: Terminating an employee to avoid paying due wages subjects you to the claim of wrongful termination in violation of public policy.

Suspension Prior to Discharge

Some Employers routinely suspend Employees before termination to have time to prepare a final paycheck or to receive one from a payroll service or the Employer’s out-of-state headquarters. You can be penalized for a willful failure to pay final wages on time, unless there is a good-faith dispute that any wages are due. An Employee who could show that his or her suspension was merely a way to extend the time for final payment of wages, rather than legitimate time for your investigation, would probably be awarded waiting time penalties due to the lack of any good-faith dispute.

Direct Deposit and Final Payment

If an Employee previously authorized direct deposit is terminated or quits, immediately terminated his or her direct deposit. You can pay final wages earned and accrued, unused vacation/PTO at the time an Employee is terminated by direct deposit to the Employee’s account only if the Employee voluntarily authorized you to do so (recommended in writing). However, the time limits still apply for making final pay available to the terminating Employee.

Expense Reimbursements and Final Pay

The payment deadlines for final wages do not apply to reimbursement of expenses that the Employee may have incurred on your behalf. Those reimbursements can be made at the normal time for payment.

This article is a simple guide, refresher, or learning tool for Employers. However there may be some other tricky mines you will need to navigate around or through in the ocean of possible scenarios with an Employee separating from employment with you. The information above is straightforward and will give you trusted bearings in straightforward separations.

However, there are more intricate and delicate guidelines to follow if you are:

• Terminating an Employee who recently alleged improper payment of wages
• Offering Severance Pay
• Terminating an Employee who was wholly or partially compensated in commissions
• Terminating a temporary Employee
• Terminating an Employee who is a member of a bargaining unit (union)

For this situations consult a professional to walk you through the process and protect your company from unnecessary risk exposure. We’re here to help you at PLB Resources.