Employees in California are entitled to fair compensation for their work. However, wage violations—whether intentional or accidental—are common.
When employers fail to pay wages on time, employees have the right to collect not just the unpaid amount but also interest on unpaid wages in California. This interest serves as compensation for the delay and discourages employers from withholding payments.
California has some of the strongest wage laws in the U.S., ensuring employees are protected from wage theft and delayed payments. What laws apply, and how can workers recover the wages they’re owed? Let’s break it down with this Freeburg & Granieri APC guide.
California labor laws are among the most employee-friendly in the nation. The state imposes severe penalties on employers who fail to pay their workers properly.
These laws reflect a broader effort to prevent wage theft, discourage unfair labor practices, and hold businesses accountable for their financial obligations.
Interest on unpaid wages serves two key purposes:
Employers may fail to pay wages in several ways, some intentional and others accidental. Regardless of the cause, employees have a right to recover both the unpaid wages and accrued interest.
Employees must be paid at regular intervals, usually biweekly or semimonthly. Employers must post and notify employees of the set pay date. If an employer fails to meet these deadlines, the wages are considered unpaid.
California law mandates overtime pay at 1.5 times the regular hourly rate for hours worked beyond 8 hours in a day or 40 hours in a week. Double time applies after 12 hours in a single workday.
Employers who fail to compensate workers for these extra hours owe unpaid wages and interest.
Employees in California must receive uninterrupted meal breaks and rest periods. If an employer denies these, the employee is entitled to one additional hour of pay per missed break.
If an employer fails to pay earned commissions or contractually promised bonuses, employees can pursue legal claims to recover the unpaid amounts, including interest.
California law requires final wages to be paid immediately upon termination or within 72 hours if the employee resigns. Delays result in penalties and interest charges. Waiting time penalties for failure to timely pay all wages at the time of termination (up to 30 days) are a type of statutory interest.
Interest is the additional sum employers must pay when they delay wage payments. It accumulates over time and increases the total amount owed to the employee.
Interest is separate from penalties. While penalties serve as punishment, interest compensates workers for lost financial opportunities. Both may apply in a wage claim.
Employers benefit financially when they withhold wages. California law ensures that workers do not bear the cost of these delays by requiring interest payments be paid on improperly paid wage claims.
California Labor Code § 98.1 mandates a 10% annual interest rate on unpaid wages, significantly higher than federal rates.
Statutory interest applies to all unpaid wages, while waiting time penalties (up to 30 days at 8 hours a day at the regular rate) compensate employees when final paychecks are delayed.
Interest accrues daily and continues until the employer pays the full amount.
Interest begins accumulating the day wages should have been paid—not the day an employee files a claim.
Some employers try to delay payments further to negotiate settlements. However, the law ensures that interest continues accumulating, discouraging this tactic.
Understanding how interest on unpaid wages is calculated is crucial for employees seeking to recover not only the wages they are owed but also the interest that compensates for the delay in payment.
California law ensures that workers are paid interest on unpaid wages at an annual rate of 10%, but the calculation process involves several steps and considerations.
California Labor Code § 98.1 mandates that interest on unpaid wages be calculated at a 10% annual rate. This is a straightforward percentage applied to the amount of unpaid wages, but the way in which it accumulates depends on the time frame over which the wages remain unpaid.
This interest rate is significantly higher than the federal interest rate and is designed to act as a deterrent to employers who withhold wages from their employees.
| Unpaid Wages | Daily Interest | Monthly Interest | Yearly Interest |
| $5,000 | $1.37 | $41.67 | $500 |
| $10,000 | $2.74 | $83.33 | $1,000 |
| $20,000 | $5.48 | $166.67 | $2,000 |
In addition to interest, employers may face waiting time penalties, civil fines, and legal fees.
Failing to pay employees properly often costs more than simply paying them on time.
At Freeburg & Granieri APC, we provide top-tier civil litigation services in Pasadena, California, with a personal touch that sets us apart. Your case will be handled directly by an attorney with at least a decade of litigation and trial experience. We treat our clients like family, offering clear communication, honest guidance, and unwavering dedication from start to finish.
If you're facing issues related to interest on unpaid wages in California, we’re here to fight for your rights. Contact Freeburg & Granieri, APC for expert legal advice and tailored solutions. Book a free consultation to protect your rights and let us help you recover what you’ve rightfully earned.
Interest on unpaid wages ensures that workers in California receive fair compensation when employers delay payments. The 10% interest rate, combined with penalties, creates a strong incentive for businesses to comply with wage laws.
If you are facing unpaid wage issues, legal action may be necessary. Freeburg & Granieri APC is ready to fight for your rights—call us today!
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