In California, when an employee quits, resigns, is terminated, or is laid off, employers have a legal duty to ensure that all final wages are paid on time. California Labor Code Sections 201, 202, and 203 establish the timelines and consequences for late payment. These protections are designed to prevent employees from being left unpaid during a vulnerable transition period after employment has ended.
Labor Code Section 201: When an employee is terminated
When an employee is terminated (fired) or laid off, all final wages are due immediately at the time of discharge. Final wages include all earned wages, overtime, accrued but unused vacation or PTO, earned bonuses, commissions, and any other earned compensation. Accrued but unused vacation or PTO is treated as wages.
Too often, employers fail to pay final wages on time because they have not maintained current timekeeping and payroll records. Employers can avoid this outcome by keeping timekeeping and payroll records current at all times. This ensures that even in an unexpected or urgent termination, final pay can be promptly and accurately issued. Where possible, employers should plan terminations in advance, including the payment of final wages.
Labor Code Section 202: When an employee quits
The deadline for paying final wages when an employee quits depends on whether the employee provided sufficient notice:
- If the employee gives at least 72 hours’ notice, final wages are due at the time employment ends.
- If the employee gives less than 72 hours’ notice, final wages must be paid within 72 hours of the resignation.
Employees are not required to appear in person to pick up their final paycheck. An employee may request that final wages be mailed, in which case the date of mailing is considered the payment date. Final pay can also be rendered through an electronic transfer.
Labor Code Section 203: Waiting-time penalties
If an employer willfully fails to pay final wages on time under California Labor Code Sections 201 or 202, the employer may owe waiting-time penalties. These penalties equal one full day’s wages for each day payment is late, up to a maximum of 30 days. Penalties accrue at the employee’s daily rate, not at the employee’s hourly rate.
Employees cannot intentionally create a situation to trigger penalties. If an employee hides, evades payment, or refuses valid tender of wages, the employer is not liable for waiting-time penalties.
Waiting-time penalties can become substantial, especially when multiple employees bring claims at once or as part of a class action.
Accurate and timely calculation of final wages (including all wages, overtime, vacation/PTO, bonuses, and commissions) is critical. If there is any legal ambiguity as to the correct amount owed, paying the higher amount is often advisable. If any wages are left unpaid past the deadline (even a small amount), waiting-time penalties begin to accrue at the same rate as if all wages were unpaid. This makes it essential for employers to have in place a fully compliant final pay policy.
An employment attorney can help employers audit their policies and avoid costly mistakes before they occur.
If you have questions about final pay laws in California, call 916-612-0326 or email ([email protected]) Finley Employment Law today. Finley Employment Law serves clients throughout California, including Sacramento, Roseville, Davis, Folsom, and Elk Grove.
The information in this blog post is for general informational and advertising purposes only and is not, nor is it intended to be, legal advice. Instead, you should speak with a California employment attorney for advice regarding your individual situation.