California employers are not permitted to delay the payment of an employee's final wages to a time that is more convenient for the company. Such an action can lead to hefty penalties. California Labor Code Sections 201 and 202 stipulate the guidelines that employers are required to follow when issuing an employee's final paycheck. Employers should take the time to understand these guidelines and the cost of failing to comply with them.
If one of your employees is involved in an event that is grounds for immediate termination, you will need to have his final check in-hand and ready for delivery when you meet with him to terminate his employment. California Labor Code Section 201 requires employers to pay all outstanding wages to an employee at the time that he is discharged. Outstanding wages include such earnings as the employee's weekly pay, any accrued leave that is due and any earned commissions.
If an employee voluntarily resigns, California Labor Code Section 202 stipulates that the employer's options are dependent upon the amount of notice that was given. If the employee notifies you at least 72 hours prior to ending her employment, all of her outstanding wages must be paid no later than her last day of work. If she resigns without giving notice, you have 72 hours to prepare and deliver her outstanding wages. Since she did not give sufficient notice for immediate delivery, she can ask you to deliver her final wages by mail.
Final wage delivery exceptions are permitted for occupations that require extensive calculations to prepare an employee's final pay. When motion picture production and broadcasting employees are laid off, the employer is required to pay their final wages in the next regular payroll cycle. When there is a layoff of seasonal employees who work in jobs related to the preparation of perishable foods, such as fruits, fish or vegetables, the final wages must be distributed no later than 72 hours after the layoff event. Oil drilling employees must receive their final wages within 24 hours of a layoff. In each case, the employee may request to have his final wages delivered by mail.
Deductions and Direct Deposits
Exercise caution when taking deductions from an employee's final wages. You are allowed to deduct federal, state and local taxes, garnishments and voluntary deductions that are authorized by the employee. You may only deduct the amount of one payment for any employee-authorized installment payments. You are not permitted to take a lump sum deduction from an employee's final wages -- even if the employee agreed to the transaction. Automatic direct deposit of wages must cease upon termination. If the employee wants the final wages deposited electronically, you will have to agree to this in a special arrangement.
Waiting Time Penalty
When an employer fails to pay an employee's final wages in a timely manner, the employee is entitled to a waiting time penalty. If you are not disputing that the wages are owed but simply waiting to pay the wages at a more convenient time, a waiting time penalty will be assessed. The penalty equals the number of days delayed multiplied by the employee's daily pay rate. Thirty calendar days are the maximum number of days that can be assessed. Weekends, holidays and days that are typically considered non-work days are included in the calculation. If there is a dispute regarding the amount that is owed to the employee, you are required to pay any money that is not in dispute to avoid the assessment of a waiting time penalty.