California Final Paycheck Law: Final Pay Deadlines and Penalties in California

California paycheck rules set firm pay deadlines for terminated, laid-off, and resigning employees. Missed payment timelines can trigger waiting time penalties for California employers.

By Brad Nakase, Attorney

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Table of Contents

1. Introduction

2. Final Compensation Following Termination and Layoff

3. Final Payment and Voluntary Resignation: at least 72 hours’ notice

4. Final Compensation and Voluntary Resignation: Shorter than 72-Hour Notification

5. Retirement is regarded as a voluntary resignation

6. Final Pay and Expense Reimbursements

7. Unjust Termination in light of Incorrect Wage Payment

8. Severance Pay

9. Final Payment Requirements for Particular Sectors

10. Putting Together the Final Pay Records

Introduction

You may be exposed to waiting time fines if you don’t give a terminating employee their last paycheck on schedule. Numerous factors determine how long it will take to pay the employee.

The amount of time needed for a final payment usually varies depending on whether the worker was fired or laid off, left without notice, or resigned with a minimum of 72 hours’ notice. The final paycheck time standards do, however, have a few specific exceptions.

Final Compensation Following Termination and Layoff

All accrued vacation time and wages are due and payable right away if you fire a worker or lay them off without a specified return date during the regular pay period. Asking or requiring an employee to postpone receiving their last paycheck until the following regular payday is unacceptable. A final paycheck cannot be withheld. It is against the California final paycheck law to deny a former employee their last paycheck to get them to:

Give back your tools, uniforms, cell phones, laptops, keys, and whatever else you own.
Repay the money they owe the company.
Fill out paperwork for reimbursement of expenses.

Paying off vacation time while employees are laid off indefinitely is the subject of the latest court case. While employees were placed on furlough in March, it didn’t turn final until June of the corresponding year, at which point all accrued, underutilized vacation time was given out. Because staff members should have received their accrued vacation time in March, the court determined that they owed thirty days of penalties (waiting time).

1. Payment is due at the discharge time

When an employee’s employment is terminated, the California Labor Code mandates that they receive all unpaid and earned pay. You may be paid waiting time fines if they don’t.

The California Supreme Court held in Smith vs The Superior Court (Los Angeles County) that this criterion is unaffected by the duration of employment or the grounds for termination. An employee’s services to a company end when they finish the task for which they were employed or when the company fires them.

According to the California final paycheck law, both are considered discharges. An involuntary dismissal from a continuing employment connection is not necessary for the “discharge.” Payment for an employee recruited for a single day of work must be made at the conclusion of that day.

2. Suspension Before Discharge

Before terminating an employee, some employers commonly suspend them to give them time to arrange their last payment or to get one from the company’s out-of-state offices or a payroll provider. Unless there is a good-faith disagreement that payments are due, such a practice may result in fines for a deliberate delay in paying final earnings on time.

The absence of a good-faith dispute would likely result in waiting time charges for a worker who could demonstrate that the suspension was only a means of extending the time for final wage payment rather than a valid period for an investigation.

3. Location and Method of Payment

Payment for fired employees must be made at the location of the termination. The worker’s location, rather than yours, is where the termination will take place. When you fire a worker who works virtually or is not physically present at your business location, you need to be ready to give them their last salary as soon as they are informed of their termination. If not, you can be responsible for the employee’s fines until the day they get their last salary.

You can pay a worker’s final wages via direct deposit if they are fired or quit after previously authorizing direct deposit. If you decide to pay by direct deposit, it can be difficult to adhere to the deadlines for providing the terminating employee with their final compensation.

Final Payment and Voluntary Resignation: at least 72 hours’ notice

On the final day of employment, you are required to pay all salary and accrued vacation time if an employee leaves with at least 72 hours’ notice.

The employer’s department or agency in the jurisdiction where the worker has been employed is where final earnings are due.

Final Compensation and Voluntary Resignation: Shorter than 72-Hour Notification

If an employee leaves with less than seventy-two hours’ notice, you are required to reimburse all earned earnings and unpaid vacation time within seventy-two hours after the notice. The 72-hour minimum applies to real clock hours rather than business hours.

If an employee requests it and provides a postal address, they are allowed to get their final salary payment by post if they provide less than 72 hours’ notice. The mailing date is regarded as the payment date for the purpose of the 72-hour obligation.

You may withhold the employee’s last paycheck till it gets picked up unless they expressly request paying by mail. You may be penalized for waiting time if you mail the last paycheck without being asked to do so. The check may be picked up by the employee after it was mailed, but prior to it being delivered. The employee will have to wait for their earnings past the legal date unless you are prepared to draft a second check and halt payment of the original.

Retirement is regarded as a voluntary resignation

For the purpose of final compensation, the California Supreme Court ruled that retirement also qualifies as a “quit” according to the Labor Code. A deputy attorney general (state of California) filed a lawsuit alleging she was not paid her last salary and accumulated, unused vacation time within 72 hours of her departure date. The state contended that since the worker retired rather than “quit,” the final pay provision did not apply.

The Court disapproved, concluding that the term “quit” actually referred to quitting employment and included retirement. According to the Court, retirement is regarded as a “quit” within these Labor Code rules, which means that final salary requirements must be paid on time.

Final Pay and Expense Reimbursements

Reimbursement of any costs the staff member may have expended on your behalf is not subject to the final wage payment deadlines. These reimbursements can be issued at the regular payment period.

Unjust Termination in light of Incorrect Wage Payment

According to the ruling in the Gould vs Maryland Sound Industries case, timely salary payment is a basic California public policy. You run the risk of being accused of unfair termination in breach of public policy if you fire an employee to avoid paying their due salary.

Terminating a worker who has recently claimed that their wages were improperly paid might result in significant liabilities unless the cause for the dismissal is well-documented and obviously unconnected to the wage accusations.

Severance Pay

The California final paycheck law does not mandate severance pay. Giving severance money to a fired employee should be done with caution because it may create a precedent for terminations in the future. Failing to provide severance pay to another worker after paying one might give rise to legal allegations that the later denial of severance compensation was discriminatory.

Severance money is typically not regarded by the EDD as earnings for establishing unemployment insurance eligibility and benefit levels.

Final Payment Requirements for Particular Sectors

California’s last paycheck deadlines have a few narrow exceptions for commissions, temporary workers, and a few particular businesses.

1. Final Payments for Commissions

Commissions are subject to the standard guidelines on the timing of salary payments since they are regarded as wages. When it comes to the schedule of final wages, commissions pose unique challenges. Many commission arrangements postpone compensation payments until a customer pays for a sale.

Therefore, following a commissioned employee’s resignation or termination from employment, a customer’s payment on a transaction may be received. The Labor Commissioner exempts these earnings from the regular final wage payment timelines since it is difficult to compute commissions on payments from customers that have not yet been received.

After a former worker’s job relationship ends, you can still provide them with commissions. The California final paycheck law is ambiguous about whether you are allowed to continue to reimburse the former employee on the regular pay schedule for all client payments made during that time, or if you have to mail them a check whenever a customer settles for a sale they made. You might want to discuss this matter with legal counsel.

2. Final Compensation for Temporary Workers

Employers are required to pay temporary workers on a daily basis by the conclusion of each workday, even on their final day.

Irrespective of when their job assignment finishes, temporary workers allocated to a “client employer” for fewer than ninety days are often paid on a weekly basis.

Final payments are due and payable right away if a temporary worker is fired by the leasing company or the temporary services provider.

If a temporary worker leaves with less than seventy-two hours’ notice, you are required to pay any accrued vacation time and salary within seventy-two hours of the employee’s notice. If an employee requests and designates a mailing address, they are allowed to get their final salary payment by post if they give less than seventy-two hours’ notice. The mailing date is regarded as the payment date for the reasons of the 72-hour requirement.

3. Final Compensation for Workers in the Concert and Theater Sectors

Via collective bargaining, unionized workers in the live theater and concert sectors who are frequently sent from hiring rooms to jobs at concerts or theaters can set deadlines for final wage payments. Waiting time fines will be imposed if the agreed-upon time restriction is broken.

Motion Picture Requirements

When an employer fires a worker in the film industry whose unique or ambiguous terms of employment necessitate additional calculations to calculate the amount owed, the worker’s final earnings may be paid on the subsequent regular payday. A “layoff” indicates that the worker is still qualified to work for that company.

Wages must be paid within twenty-four hours of an employee’s termination, excluding Saturdays, Sundays, & holidays. “Discharge” refers to the employee’s employment being terminated without cause. Payment can be mailed. The date of mailing is regarded as the date of payment.

4. Conditions for Organizations in Professional Sports

Park workers may be paid by professional baseball clubs in California on a normal paycheck following the conclusion of the season. According to the California final paycheck law, ballpark workers are regarded as constantly employed until they quit or are fired; the end of the season does not automatically result in a termination.

5. Conditions for Print Shoot Workers

Employers of “print shoot employees”—people engaged for a brief period of time to provide services related to a still image shooting, including digital or film photography, for usage in digital, print, or Internet media—may pay wages due upon termination on the following normal payday rather than right away.

6. Conditions for Fruit, Fish, or Vegetable Curing, Canning, or Preservation

When a group of workers is laid off due to seasonal work in the canning, curing, or preserving of fruits, fish, or vegetables, the employer is obligated to reimburse all earned but unpaid salaries within 72 hours. If an employee requests payment and provides a mailing address, you may email it to them.

Regardless of when earnings are collected, payment is considered timely under the rules of this restricted exception if they are mailed within seventy-two hours of the termination.

7. Oil Drilling Requirements

When a staff member or team of employees in the oil drilling industry is laid off, the employer is required to pay all salaries and accrued vacation time within 24 hours of the termination, except Saturdays, Sundays, & holidays. When payments are mailed, the date of mailing is regarded as the payment date.

Putting Together the Final Pay Records

Gather all timecards and records pertaining to the employee’s unpaid work period when you decide to fire them or receive notification of voluntary termination. Inform the person in charge of issuing the last paycheck of the deadline.

Calculate and, if necessary, prorate the duration of time truly worked on the last day of work using the Final Paycheck Worksheet. Add normal hours, overtime, paid vacation time that are included within this time frame, leave for illness that was taken, and any accumulated vacation time.

Take into account any additional perks that the employee could be entitled to, such as severance compensation, worker expenses on your part, other employer-provided paid leave (provided that your policy requires that accrued leave be paid to the worker in this situation), etc. Once the amount owed to the employee has been established, compute any necessary deductions, such as:

State, local, and federal income taxes
Medicare and Social Security
State Disability Insurance
Life Insurance
Unemployment insurance
Health coverage
Long-term insurance for disabilities
Other things, like parking, etc.

Even if a worker’s debt is covered by a contractual agreement to reimburse the full amount of the obligation on demand, at termination, or in another way, you are not allowed to withhold any amount from their final check that represents the unpaid portion of the debt.

Have the employee sign an affirmation that they got the final paycheck. This is to prove that you fulfilled the last payroll deadline. Additionally, you might ask the worker to ensure that they were paid correctly. Although neither of the documents is necessary, they are useful business records.

Note: You can send unpaid checks with a description of your attempts to get in touch with the worker to the closest Labor Commissioner location if you have unpaid checks on your records that are made payable to workers whose position has been discontinued (i.e., since you are not able to find the worker), and you have put forth every effort possible to pay the wages.

If the Labor Commissioner’s office is unable to find the employee to pay their wages, the checks will be put into the state-run State of California Unclaimed Wages Fund.

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California Final Paycheck Law: Final Pay Deadlines and Penalties in California

Introduction

Final Compensation Following Termination and Layoff

Final Payment and Voluntary Resignation: at least 72 hours’ notice

Final Compensation and Voluntary Resignation: Shorter than 72-Hour Notification

Retirement is regarded as a voluntary resignation

Final Pay and Expense Reimbursements

Unjust Termination in light of Incorrect Wage Payment

Severance Pay

Final Payment Requirements for Particular Sectors

Putting Together the Final Pay Records

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