Under California Law, employers are required to pay wages immediately to employees who are terminated or who resign with 72-hours notice in a final paycheck. Otherwise, employers are liable to pay a waiting time penalty equal to the worker’s daily rate of pay for each day late, up to 30 days.
A final paycheck must include wages for all hours worked, including overtime, and payment for all accrued, unused vacation time. If an employer willfully fails to comply with this law, they will have to pay a waiting time penalty. The waiting time penalties in California involve the employee receiving an extra day of pay, based on their normal daily rate, for each day the wages remain unpaid, again, up to 30 days.
Importantly, the waiting time penalty accrues on a daily basis for every day that the final wages are not paid, not just the days that the employee would have normally worked. So even if the employee worked only Monday through Friday, the penalty would accrue on Saturdays and Sundays as well.
A waiting time penalty can be substantial, for more information from an employment attorney, continue reading below.
For most California employees, wages must be paid at least twice during each calendar month on days designated in advance as regular paydays. Employers have to post a notice specifying the regular paydays and the time and place of payment in advance.
Furthermore, any work performed within the first 15 days of each calendar month must be paid between the 16th and the 26th day of that month. Any work performed between the 16th and the last day of the calendar month must be paid between the 1st and 10th day of the following month.
If an employee works extra or additional hours in excess of the normal work period, they must be paid the overtime wages for the additional work no later than the payday for the next regular pay period.
Exempt employees may be subject to different payday requirements than nonexempt employees since they are generally exempt from certain California and federal wage and hour laws. Exempt employees – also known as white-collar workers – may include:
Exempt salaried employees may be paid once a month, on or before the 26th day of the month during which work was performed if the entire month’s salary is paid at that time.
Additionally, some employees who are covered by a collective bargaining agreement may have different payment arrangements.
California Labor Code § 203 imposes a waiting time penalty on employers who willfully withhold the final paychecks from employees who are terminated or quit. The penalty is equal to the employee’s daily wage for each day the final paycheck goes unpaid, up to 30 days.
The full text of Labor Code § 203 reads as follows:
203. (a) If an employer willfully fails to pay, without abatement or reduction, in accordance with Sections 201, 201.3, 201.5, 201.6, 201.8, 201.9, 202, and 205.5, any wages of an employee who is discharged or who quits, the wages of the employee shall continue as a penalty from the due date thereof at the same rate until paid or until an action therefor is commenced; but the wages shall not continue for more than 30 days. An employee who secretes or absents themselves to avoid payment to them, or who refuses to receive the payment when fully tendered to them, including any penalty then accrued under this section, is not entitled to any benefit under this section for the time during which the employee so avoids payment.
(b) Suit may be filed for these penalties at any time before the expiration of the statute of limitations on an action for the wages from which the penalties arise.
Most states have laws dictating when employees must get their final payment. In some states, including California, the time limit depends on whether the employee quit or was fired. California's law on the payment of wages is the one of the most stringent in the nation.
An employee who is fired (or laid off) is entitled to a final paycheck immediately, meaning at the time of termination or layoff. This includes employees who are fired or laid off for cause, or for no reason at all.
Note that payment should be made at the place of discharge unless the employee requests it be mailed or already authorized direct deposit. Also, note that employers are not allowed to condition a final paycheck on the employee waiving rights or releasing the employer’s liability – any agreement like this is unenforceable and subjects the employer to a misdemeanor charge.
The rules are slightly different when the employee quits. If an employee quits without giving advance notice, the employer must pay final wages within 72 hours. However, if an employee quits and gives at least 72 hours' notice, the employee is entitled to the final paycheck immediately, meaning on his or her last day.
An employee’s final wages depends on unpaid wages for labor performed as an employee, as well as any unused paid vacations or paid time off accumulated by the employee. Although employers are not required to provide paid vacation, those who do must treat it like wages.
Not all states require employers to cash out unused vacation, and some require a payout only if the employer has adopted a policy requiring it. California is different: California employees are entitled to all of their unused vacation or PTO on termination, regardless of the employer's policy.
Waiting time penalties apply only to “wages” that are received by the employee. Under California’s law, wages can consist of the following:
Therefore, the waiting time penalties for California could kick in for the non-payment of many types of wages and benefits that employees receive, regardless of his or her intention.
Some employees in certain industries may have different final pay rulesthat do not require an employer to make the final paycheck available upon termination. This includes:
An employer is not allowed to force the employee to sign a release of legal claims or a waiver in exchange for the receipt of their final payment. If the employee does sign some document under these conditions and circumstances, then the document is null and void under the law.
However, if the parties resolve a good-faith dispute, then the employer can require the employee to sign a release.
When an employer intentionally fails to pay employees on time are subject to waiting time penalties unless they have a good faith dispute concerning the amount of wages or final wages due. The employer must present a good faith defense that – if successful – would find the employer did not owe the employee any wages.
Examples of a good faith dispute include:
If the employer has a good faith defense – and therefore did not willfully fail to pay – there may be no waiting time penalties. An example of a willful failure to pay is giving an employee a paycheck from a bank account with insufficient funds, or from a bank where the employer does not even have an account.
If the employer has a dispute over a portion of the employee’s unpaid final wages, the employer must immediately pay any wages that are not in dispute.
An employee who is owed unpaid wages can file a lawsuit or wage claim against their employer to recover his or her wages, in addition to a waiting time penalty.
An employer who pays late wages or fails to make final payments available is in violation of the California Labor Code. In many cases, the employer may also be in violation of another California Labor Code or the federal Fair Labor Standards Act (FLSA).
In California wage and hour lawsuits, an employee or group of employees may file a lawsuit against their employer, seeking damages for:
If an employer is violating the legal rights of one employee, they may have a pattern of similar violations against other employees. Successful wage and hour class action lawsuits often involve unpaid wages, late payment of wages, and other wage and hour violations.
An employee who files a wage and hour lawsuit against an employer who fails to pay wages on time may be able to seek payment, statutory damages, attorney fees, and court costs.
Private Attorneys General Act (PAGA) claims allow an employee to sue for late wages, as well as a civil penalty. The penalties for failing to pay employees on time are as follows:
Any civil penalties recovered by an aggrieved employee are divided up as 75% to the Labor and Workforce Development Agency and 25% to the aggrieved employees.
When an employer fails to pay wages earned on termination, it may be assessed a waiting time penalty for each late day. The waiting time penalty is equal to
The waiting time penalty is calculated at the daily wage rate multiplied by the number of days of non-payment, up to a maximum of 30 days. The daily wage rate is the regular rate of pay, which is sum of all the wages, bonuses, commissions, and vacation pay, which is then divided by 52 (workweeks), and divided again by 40 (number of hours of work a week).
In addition to unpaid wage and waiting time penalty, plaintiffs may also be able to recover
Even if your employer gives you a final paycheck, on time, you may still be entitled to a waiting time penalty if you don't receive all of your compensation. For example, if a former employer pays you half of your final paycheck on time, then pays you the rest on the company's regular payday two weeks later, you are entitled to a two week waiting time penalty.
The same is true if your final paycheck does not include all of your accrued vacation time. The amount of the waiting time penalty doesn't depend on whether or not the employer paid you any of what you are owed. The waiting time penalty applies in full whenever you are still owed compensation after the deadline passes.
If you don't receive your final paycheck on time, or you receive only part of what you are owed, you have two options: You can file a complaint with the California Division of Labor Standards Enforcement (DLSE) or you can file a lawsuit against your employer.
Once you file your wage claim with the nearest DLSE office to you, it gets assigned to the Deputy Labor Commissioner. This is the individual who will decide to refer it to a conference or hearing, or just get it dismissed.
The goal of a conference is to ascertain whether your claim is valid. It will also be a priority to see whether it can be resolved without moving to a hearing. If the claim cannot be remedied at a conference, it gets referred to a hearing or it gets dismissed. The latter occurs when there is not enough evidence to support a claim. During a hearing, both you and your employer will testify, as will any witnesses. Everything is done under oath and it is all recorded. Once a hearing is over, there will be an Order, Decision, or Award given to both you and your employer.
Either you or your employer have the ability to appeal the Order, Decision, or Award. If it is appealed, there will be a date set for a trial. This is when both you and your employer can bring in any evidence or witnesses. Anything brought forward to the previous hearing will not be used in determining when the decision of the trial will be. If you are unable to hire representation, the Division of Labor Standards Enforcement will give you representation.
If you win, you'll be entitled to the wages owed plus waiting time penalties for up to 30 days.
Whenever an employment contract or employment relationship ends, the employee is entitled to receive wages owed in a timely manner.
If your employer is illegally withholding pay from you, has docked your pay for an illegal reason, or committing any other wage and hour violation, consider contacting a California employment attorney to explore your legal options. There are significant benefits to an attorney client relationship in discussing your wage violation case confidentially with one of our skilled California labor and employment attorneys.
For questions about unpaid or late final pay, reach out to us today!
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