The state of California has extremely strict rules regarding final pay to employees. California labor law stipulates that employers provide immediate final pay to employees who are laid off, fired or quit with sufficient notice. Employers that fail to do so may be penalized by the state. This legal protection covers employees but doesn't extend to independent contractors.
Final Pay Timing
With few exceptions, the state of California requires employers to pay employees any outstanding pay immediately at the time of termination. The employer can pay the final paycheck through a direct deposit if the employee has previously authorized direct deposit. Otherwise, the employer needs to give the departing employee a paper check immediately.
This rule applies for employees who have been fired, laid off or quit with at least 72 hours notice. If the employee quits without giving any prior notice, wages must be paid or mailed within 72 hours of the employee quitting.
Amount of Final Pay
Along with wages earned, California employers must also pay out departing employees for unused vacation and paid time off. Employers don't need to pay out employees for unused sick days.
Hourly employees should be paid for the total amount of hours logged during the departing pay period. Normally, salaried employees must be paid the same salary every week. However, if a salaried employee is departing, the employer can pay a partial salary for that week. For example, if an employee's last day is Wednesday, the employer can pay three-fifths of the regular salary for that week.
Consequences for Employers
California employers that don't pay departing employees on time can face stiff financial consequences. If the employer willfully fails to pay the wages on time, it will face a penalty of a day's worth of employee wages for every day it failed to pay. For example, suppose an employee earned $200 a day, was laid off, and was paid two days later by his employer. The state could fine the employer $400 and award it to the departed employee.
Rules for Independent Contractors
California labor laws surrounding final pay are only applicable to employees. Rules for pay of independent contractors are governed by the terms of any agreements and contracts between the two parties. If the contract failed to address a final payment time frame, the contractor may have little recourse but to wait for payment. If a client fails to provide a final payment for the contractor or it violates the contract, the independent contractor can take legal action against the client.
Read More: Sole Proprietorships With Independent Contractors
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