California Employees are Entitled to the Timely Payment of Wages at End of Employment

July 14, 2021

The California Labor Code imposes obligations on employers regarding the payment of final wages and provides penalties if the employer fails to comply. Regardless of whether an employee resigns or is terminated, the employer is required to provide the employee with their final wages in a timely manner. An employer who fails to pay an employee’s final wages in full and on time is liable for penalties in addition to the wages owed and unpaid. An employee who prevails in an action for unpaid wages may also be able to recover attorney’s fees, costs, and interest.

What Are Final Wages?

An employee’s final wages include all regular and overtime wages earned, as well as all accrued, unused vacation time, which must be paid at the employee’s final rate of pay pursuant to Labor Code § 227.3. However, an employer may not have to pay vacation time to an employee subject to a collective bargaining agreement if the agreement “clearly and unmistakably” waives that right. Choate v. Celite Corp. (2013) 215 Cal.App.4th 1460, 1465. While an employer may place a legitimate cap on the accrual of vacation pay, an employer cannot require an employer to forfeit vested vacation time at the time of termination.

An employee’s final wages may also include commissions earned and severance pay, but only to the extent the employment agreement provides for unconditional severance pay. See Triad Data Services, Inc. v. Jackson (1984) 153 Cal.App.3d Supp. 1, disapproved on other grounds by Smith v. Rae-Venter Law Group (20020) 29 Cal.4th 345.

Requirements When an Employee is Discharged

If an employer discharges and employee, the employer must immediately pay the employee all wages earned and unpaid at the time of discharge pursuant to Labor Code § 201. The discharged employee must be paid “at the place of discharge” pursuant to Labor Code § 208. For these purposes, “discharged” means involuntary terminations, including layoffs, as well as the release of an employee upon completion of a specified job assignment or time duration for which the employee was hired. Smith v. Superior Court (2006) 39 Cal.4th 77, 90.

Requirements When an Employee Resigns

Pursuant to Labor Code § 202, if an employee resigns without notice, the employer is required to provide the employee their final wages within 72 hours of the resignation, except that if an employee gives notice 72 hours or more in advance of the employee’s final day of work, the employee is entitled to their final wages on the last day of work. Pursuant to Labor Code § 208, an employee who resigns must be paid at the office or agency of the employer in the county where the employee has been performing labor.

Pursuant to Labor Code § 202, an employee who resigns without providing a 72-hour notice may request that the employer mail their final wages to them. If the employee asks to receive their final wages by mail, the date of mailing is considered the date of payment. If an employer sends an employee their final wages by mail without the employee’s consent and the check is diverted without delivery to the employee, then no payment is deemed to have occurred, and the employer may face penalties. See Villafuerte v. Inter-con Security Systems, Inc. (2002) 96 Cal.App.4th Supp. 45, 50-51.

Waiting Time Penalties

Pursuant to Labor Code § 203, if an employer willfully fails to pay the final wages owed to an employee who is discharged or who quits in accordance with Labor Code § 201 or Labor Code § 202, respectively, the employee’s wages continue as a penalty until paid, for up to 30 days.  Accordingly, employers who willfully fail to pay an employee all final wages owed will be liable for up to 30-days’ wages at the employee’s regular rate of pay. An employee who is not paid their final wages may also be entitled to attorney’s fees and costs pursuant to Labor Code § 218.5 and interest pursuant to Labor Code § 218.6.

Please note that the foregoing rules do not necessarily apply in the case of temporary service employees, employees engaged in the production or broadcasting of motion pictures, print shoot employees, employees in the oil drilling business who are laid off, events employees, and certain employees covered by a collective bargaining agreement who are employed at a venue that hosts live theatrical or concert events.

For employees, it is important that you are paid all wages owed. If you think you are not being paid all your wages, or if your employer failed to pay your final wages owed at the time of your discharge or resignation, please contact the attorneys at Freeburg & Granieri, APC today.

For employers, now is the perfect time to review your payroll policies and practices. The liability for failing to pay your employees their final wages owed at the time of their termination or resignation can have devastating effects on your business. Please contact the attorneys at Freeburg & Granieri, APC today to have your payroll policies and practices reviewed.

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