California Law on Pay When You Quit

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Although many employees find satisfaction in their jobs, the basic reason most people work is to earn a paycheck. And getting that final paycheck quickly can be even more important whether the worker quits, is fired, or is laid off.

In California, employment laws specify how and when an employer must pay a departing employee. In general, the law requires that an employer give full pay, including compensation for outstanding vacation time and paid time off, on the day that the worker leaves. Failure or refusal to do this can result in a monetary penalty, but there are exceptions to this rule. Anyone working or hiring workers in California should get an overview of the state's laws about final pay to employees.

California's Final Paycheck Law

The general rule in California requires employers to pay workers all outstanding amounts due them on their last day on the job. That is the case whether the employer has fired the employee or whether the employee has resigned or quit the job. The rule applies to workers paid by the hour as well as employees paid a weekly or monthly salary. If an employee earns a monthly salary and is usually paid every two weeks, termination in the middle of that period requires the employer to calculate the percentage of the regular paycheck due at the time of termination.

The amount to be paid that final day includes all wages due to the final hour. It also includes all accrued vacation time that has been earned but remains unpaid, as well as all accrued paid time off. Unpaid sick leave is the exception; compensation for accrued but unpaid sick leave need not be included in the final paycheck.

Involuntary Termination of Employment and Final Wages

The general rule requiring payment on departure applies whenever an employer fires or terminates an employee. The employer must keep this in mind when considering giving the employee notice that they are fired.

The law requiring immediate payment can be challenging if the termination occurs late in the day or when the employee is at a remote location or traveling on business. Still, as long as it is the employer who makes the termination decision, payment of wages on the final day is mandatory. The employer should plan ahead for this and resist firing an employee until they are able to issue the final paycheck.

California Employees Quitting Without Notice

Different rules apply in California if an employee is the one to initiate the departure. That is, if an employee quits, the timing is not in the hands of the employer, so the law about final paychecks is slightly different.

If the employee quits giving at least 72 hours' notice to the employer, the employer is required to pay the employee in full all wages and accrued paid time off on their last day of work. But if the employee quits without giving any notice, California law makes an exception.

In that case, the employer has not had enough time to prepare for the departure and is not required to calculate the pay due and to create a check on the spot. Rather, when an employee quits without giving at least three-days' notice, state law requires the employer to pay the final check within 72 hours of the time of quitting.

Method of Payment by California Employers

In most cases, an employer is required to give a departing employee a paper check at the end of their final day of work. In the case that the employee authorizes pay by direct deposit, the employer can pay the final payment through a same-day direct deposit.

However, if the employee quits without giving notice of at least 72 hours, the employer has 72 hours in which to provide the final check. In this case, the employer can either hand the employee the check within this period, pay it by direct deposit if is specifically authorized by the employee, or have the employee pick it up at the office. Alternatively, if the employee leaves a mailing address, the employer can mail the check to the employee. The date of mailing constitutes the date of payment.

Other Exceptions to Pay-on-Departure

California employment law builds in a number of exceptions to the rule that all outstanding amounts due to an employee must be paid on the day of departure. One general exception is when the employee has been laid off by the employer for a set period of time and is given a return-to-work date. In this case, the worker's discharge is temporary, which means that, under the California labor code, an employee's final paycheck is not due that same day of departure. The employer is free to pay the wages due on the next regular payday.

There are also exceptions for certain types of workers. These include:

  • Workers in jobs relating to the curing, canning or drying of any variety of perishable fruit, fish or vegetable. They must be paid within 72 hours after the layoff.
  • Employees producing motion pictures whose unusual or uncertain terms of employment require special computation in order to ascertain the amount due. They must be paid by the next regular payday.
  • Employees working in oil drilling who are laid off must be paid within 24 hours after discharge, excluding Saturdays, Sundays and holidays.
  • Employees who work at a theater or concert venue under a collective bargaining agreement are to be paid as required in their collective bargaining agreement.

Consequences for Failure to Pay Former Employees

California labor law sets out monetary penalties for employers that fail to meet the pay-on-departure requirements and time limits. An employee who is not paid under these laws can contact the Division of Labor Standards Enforcement to report this failure.

The employer who doesn't comply with the law can be penalized the equivalent of one day's wages for the particular employee for every day late in payment. For example, an employee earning $200 a day who is terminated and issued a final paycheck a week late by their employer. In this case, the employer could be fined $200 x 7, or $1,400. This amount would be awarded to the departed employee.