California Final Paycheck Law: Payment Timelines, Legal Rules, and Employer Responsibilities

Table of Contents

1. Introduction

2. Workers Who Are Let Go or Fired

3. Workers Who Resign or Quit

4. Total Paycheck Amount

5. No deduction for employer property that is not returned

6. Is it possible for an employer to use direct deposit to pay a final paycheck?

7. Employer Penalties for Final Paychecks That Are Late

8. Sectors with Particular Final Paycheck Schedules

Conclusion

The California Labor Code mandates that businesses quickly pay any outstanding wages to departing employees at the conclusion of an employment relationship. Depending on how an employee leaves, California law sets varying payment dates (that is, whether the worker quits or gets terminated). According to California’s final paycheck law, an employer is required to pay an employee’s last salary right away when they are fired.

The employer is also required to pay the employee’s last salary within seventy-two hours of the employee’s resignation (unless the worker has given 72 hours’ notification of their decision to leave, in which event they are entitled to their earnings at the time of departing).

Additionally, California’s final paycheck law stipulates that an employee may be entitled to recoup from the company an amount of as much as thirty days’ pay (known as waiting-time fines) if the employer knowingly fails to provide these final wages on time. Attempts to recover waiting-time fines are usually subject to a three-year legislation of limitations.

1. Introduction

Employers are required by California employment law to give their workers their earned & unpaid earnings, also referred to as the final payment, within a certain time frame following the termination of their employment relationship. The timetable is dependent on how the partnership ends, namely if the staff member quits or steps down or the company fires or dismisses them. California’s final paycheck law also dictates how and where the last paycheck of an employee must be paid by the employer. Additionally, depending on the business, different sorts of employees are subject to different regulations.

2. Workers Who Are Let Go or Fired

An employee gets “discharged” by their employer when they are let go or laid off. Regardless of the reason for their termination, employees must receive their earned & unpaid salaries right away. This implies that on the day of dismissal, the worker must get their last paycheck. This criterion is broken even a day after the dismissal. If an employee is fired by their employer, they must be paid at the time of the termination.

3. Workers Who Resign or Quit

Within a 72-hour period of leaving their position, an employee who resigns with less than seventy-two hours’ notice to their employer is entitled to their compensation. However, the employer is required to compensate the worker at the point of departure if the person gives a minimum of 72 hours notification before they intend to leave.

A. Email Notification to Employer

One intriguing question that arises when resigning or quitting via email is when the 72-hour period starts to run. Does it start running when the departing worker sends the message via email, or does it start running when the company reads or receives it? When a worker quit via email after the business closed on a Friday night, California’s Court of Appeal determined in 2018 that the 72-hour period did not start to run at the moment the worker sent the email.

Regretfully, the Court did not address whether the seventy-two-hour clock started to run on the morning of Monday (when the company was back in business) or Saturday morning (at the time) the employer saw the email).

When the business of the employer closed on Friday night, the Court ruled that the timer did not begin to tick. If the Court decided that the 72-hour clock began to run on a Friday night after the employer’s office had closed, it might have unreasonable consequences leading to absurdity or mischief in the future, the Court observed.

B. Delivering the Last Paycheck

When an employee resigns, they must be paid “at the agency or office of the company in the county wherein the staff member has been doing work.” An employee who resigns or quits may also opt to have this remuneration sent to their mailing address. Payment is deemed made on the day the employer sends the last paycheck, not the day the employee receives it, if the employer does so.

4. Total Paycheck Amount

All salaries earned and owed at the point of the employee’s departure must be included in the last payment. The worker’s earned but unclaimed paid vacation time is included in the sum owed.

Employers are not required by law to pay out paid sick leave that has been earned but not used in the last paycheck. The employer must, however, abide by the requirements of an employment agreement or workplace policy and include the accrued but unused sick leave in the last paycheck.

5. No deduction for employer property that is not returned

From a final paycheck, an employer may subtract legally necessary expenses like taxes & Social Security. If a documented agreement is in effect, deductions for 401(k) contributions and health insurance premiums may also be allowed. However, unreturned employer assets cannot be deducted from the last paycheck under California’s final paycheck law. A final paycheck must be paid “without reduction or decrease” per the law.

An employee’s debt cannot be subtracted from their last paycheck by their employer. Employers are not allowed to deduct training expenses from a worker’s last paycheck. To put it briefly, a business is not allowed to use “self-help” strategies like deducting money from a worker’s last salary or making the worker an insurer of its liabilities.

An employer cannot deduct the cost of an office computer from an employee’s last payment, for instance, if the worker fails to return the computer to the company at the time of termination.

Other legal avenues, such as small claims court, are available to the employer to reclaim the unreturned goods. The sum might not be subtracted from the worker’s last paycheck.

6. Is it possible for an employer to use direct deposit to pay a final paycheck?

A lot of firms usually deposit their employees’ paychecks straight into their bank accounts. As long as the worker has willingly consented, California’s final paycheck law permits a company to pay an employee’s salary by direct deposit. Direct wage deposits to an employee’s bank, loan, savings, or credit account that were formerly authorized by the worker must be immediately stopped when the worker quits or is fired, according to the Department of Industrial Relations.

Wages must be paid upon dismissal of a position in the manner outlined above unless the staff member has voluntarily consented to the deposit and the company complies with California Labor Code Section 213(d), which addresses the payment of due wages upon quitting or termination of employment. Therefore, an employer must get permission once more before paying a leaving employee’s final earnings by direct deposit.

7. Employer Penalties for Final Paychecks That Are Late

California’s final paycheck law stipulates stringent deadlines for the last payment of salaries to departing employees, as previously mentioned. Labor Code Section 203 establishes penalties (sometimes referred to as the “waiting-time penalties”) for companies who knowingly neglect to make timely payments of the entire amount owed in order to comply with these deadlines. “Waiting-time penalties” is the term used to describe Section 203 fines for intentional delaying in making payments of end-of-employment salaries.

A. The amount of the penalty

The employee may be entitled to penalties of up to thirty days’ pay if the employer does not give the departing worker their last salary. Even days that the worker wouldn’t typically work are included in the above 30 days, like weekends for a worker who exclusively worked during the week.

This rule is meant to encourage businesses to pay monies they have admittedly owed to a fired or terminated employee as soon as possible and to enforce the early payment of rightful wages.

B. How the 30-Day Wage Penalty is Calculated

It is necessary to compute a daily salary rate, which is then multiplied by the total number of days that the payment is not received, up to a maximum of 30 days.

Wages start to accrue on the due date and continue to do so at an identical rate until they are paid or an action is taken; nevertheless, they cannot be paid for longer than 30 days. As a result, unpaid wages keep piling up every day for a maximum of 30 days. Penalties are assessed on both non-workdays and days that the worker may have worked.

Notably, an employee’s number of days worked in the month has no bearing on the nonpayment of wages. If it did, a worker who performed two days per month as part-time staff would only be eligible for two days of penalty pay when they quit and their employer failed to pay them their due salary. This negligible sum would not advance the statute’s objective of promoting timely payment of wages owed upon cessation of employment.

Let’s take an example where an employee works eight hours per day on average and is paid $25.00 an hour. The waiting-time penalty in this instance can reach $200 a day and $6,000 for the full 30-day span.

A worker may be eligible to receive reimbursement for any legal costs paid in an effort to recover the waiting-time penalty in addition to the penalty itself. An employee can file a wage claim to the Labor Commissioner or file a legal action in civil court to hold an employer accountable for unpaid pay. A worker may be eligible to recoup any legal fees and expenses expended if they choose to pursue any of these options.

C. Missed Rest Breaks and Meal Breaks

The final paycheck regulations in California also apply to meal & rest break premiums. After an employee quits their position, any outstanding compensation must be quickly paid, just like other types of earnings. “Missed-break premiums comprise wages for provisions of Labor Code section 203,” the Supreme Court of California ruled, meaning that if the premium salary is not paid on a period of time waiting time fines may be imposed under that legislation.

D. Deadline for Employee Filing

A wage claim or litigation concerning these penalties may be brought by an employee at any time prior to the window of limitations expiring. The 3-year statute of limitations, sometimes known as the submission deadline, applies to unpaid-wage disputes. The 3-year filing deadline is applicable “regardless of whether an appeal for unpaid final wages is filed with a worker’s claim for penalties.” Accordingly, the worker has 3 years to demand the unpaid penalty even if the company paid the final salary but not the related penalty.

E. Potential Defenses of the Employer

If the employee willfully fails to get their final salary or in any other way declines to receive their final salary, the penalty is not applicable. Stated differently, an employee cannot postpone the last salary payment to later sue the company for waiting-time fines.

Additionally, the employer had to knowingly withhold the final paycheck from a departing employee in order for the individual to be eligible for the waiting-time penalties. This indicates that the company purposefully left the employee’s last paycheck unpaid when it was actually due.

Even while a court might not find a clerical error on a check total to constitute an intentional failure to provide final wages, an employer may still be in violation of its duty to pay wages on time if it does not correct the matter right once.

In a Court of Appeal judgment (2018), for instance, the Court determined that an employer’s error in writing the wrong amount on a check meant to pay a worker their timely earnings did not constitute a “willful” failure to provide the departing worker her final salary. Nevertheless, the Court also determined that the employer was required to pay 9 days of waiting-time fines since they failed to fix the error for nine days after learning about it.

Additionally, if the employer disputes in good faith whether the worker’s paychecks were owed at the point of the employee’s departure or how much they were due, the firm may avoid paying waiting-time penalties for failing to pay the departing worker’s wages on time.

A debate between an employee and employer in good faith regarding if and when salaries were due does not constitute a deliberate failure to provide wages. When an employer argues that wages are not owed in a reasonable and sincere manner, they are protected from criminal or civil sanctions under long-standing legislation.

An employer may be able to use the good faith argument to avoid paying waiting-time penalties, for instance, if the law is ambiguous or unresolved on whether particular wages may be owed to the employee. One recent instance was an employer paying an employee’s last salary but deducting setoff to cover the employee’s debt to the company. The law was unclear at the time when the company took the setoff, therefore it was unclear if they had the authority to do so. The Court did not impose the employee waiting-time penalty since the legislation was still unclear.

The employer has to show a legitimate argument that would bar an employee from getting their last paycheck to prove a good-faith debate about the possibly unpaid earnings. It is irrelevant if the employer’s argument is ultimately effective or not if it is grounded in law or truth, which means the employer thinks something is accurate or that legislation supports their position.

A company does not willfully and knowingly violate wage statement standards if it honestly and reasonably believes—albeit incorrectly—that it is complying with them. The employer’s defense ought to be reasonable, well-supported by evidence, and offered in good faith.

8. Sectors with Particular Final Paycheck Schedules

Some industries have slightly varied deadlines for employers to provide a departing employee their last paycheck. Additionally, the final paycheck distribution method and location may vary.

A. Seasonal Workers in Agriculture

Seasonal agricultural workers’ employers may be given additional time to give out their last paychecks to leaving workers. Employers have 72 hours to deliver the last salaries when they dismiss seasonal agricultural workers collectively at the conclusion of the season. The employer is required to mail the last payment if the worker asks for payment by post and gives an address.

B. Workers in Motion Pictures

Employers of workers in the film industry who are hired on a “call” basis or for a project with a set duration are required to pay the last paycheck before the subsequent regular payday following the termination of the employment relationship. The employer can send the paycheck or provide it to the worker at the place where the worker was employed or where the worker was recruited in the county. This is applicable to workers who leave, are let go, or are laid off, as well as those who finish their jobs within the allotted time.

If the employer pays wages within seven days of the payroll period ending, they may do so in accordance with a contract of collective bargaining that specifies different procedures or deadlines for the last paycheck rather than the California Labor Code.

C. Employees of Print Shoot

An individual employed for a limited time to provide services related to or assist a still picture shoot, including film and digital imaging, for usage in printed, digital, or online media is known as a “print shoot employee.” The final paycheck must be given by the employer to a print shoot worker by the following normal payday following the termination. The end of the job connection, whether through resignation, layoff, dismissal, or the completion of a predetermined period, is known as the “time of termination.”

If the earnings are paid within 7 days of the payroll period ending, the employer may choose to follow the collective bargaining agreement’s specified procedures or deadlines for the last paycheck rather than the California Labor Code.

D. Oil Drilling Workers

When a person is laid off or fired in the oil and gas sector, their employers are required to pay their final salary within twenty-four hours, excluding holidays and weekends. This accounts for the reality that oil drilling operations are frequently located distant from the company’s headquarters, which adds time to the computation and payment of wages. The day of posting is the actual day of payment if the company mails the last paycheck.

E. Employees in the Events Industry

Workers at professional baseball venues are known as event employees. The conclusion of an event or sequence of events, such as the baseball season, does not constitute a layoff or termination for events-based work, and the employer must pay the worker by the following normal payday.

To put it another way, unless they quit or are dismissed, an events worker is regarded as continually employed. The last pay timeline obligations for events employees usually adhere to California Labor Codes 201 & 202 at termination. However, if the wages are received within seven days of the payroll period ending, an agreement on collective bargaining may set alternative rules.

F. Workers at Live Events Venues

Employees who pass a hiring hall and are regularly assigned to work at a location that accommodates live performances or concerts are known as live-event employees. The collective bargaining document allows live-event workers and their companies to set final pay dates.

Conclusion

Employers are required by California’s final paycheck law to give departing employees their last paycheck immediately, with the limitations mentioned above. If a departing employee’s last paycheck does not meet these legal standards, they may be entitled to waiting-time fines from their company.

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California Final Paycheck Law: Payment Timelines, Legal Rules, and Employer Responsibilities

1. Introduction

2. Workers Who Are Let Go or Fired

3. Workers Who Resign or Quit

4. Total Paycheck Amount

5. No deduction for employer property that is not returned

6. Is it possible for an employer to use direct deposit to pay a final paycheck?

7. Employer Penalties for Final Paychecks That Are Late

8. Sectors with Particular Final Paycheck Schedules

Conclusion

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