It is important to have a good understanding of California wage and hour laws to avoid costly lawsuits. Paying your employees late and could result in interest, penalties, and legal fees.
Federal Law Regarding Late Payment of Wages
The Fair Labor Standards Act was created to protect laborers. All employers must meet the minimum requirements of the FLSA and any state employment laws which supersede it. Employers must pay their employees promptly, meaning on the next payday after the pay period in which the hours were worked. The employee must be paid for all hours worked during that pay period, including overtime.
A late payment to an employee is considered the same as a non-payment and will attract the same penalties. The degree of penalty will depend on if the non-payment was willful.
A willful non-payment means that the employer knew they had failed or was going to fail to pay their employees on payday. A willful non-payment attracts an additional penalty called liquidated damages. The employer must pay liquidated damages totalling the unpaid wages and interest. The penalty is steep to discourage employers from withholding pay.
If your company had or is having cash flow problems and you pay your employees a week late, the payment is willful as you were aware you would not be able to make wage payments on time.
Non-payment or late payments will automatically be considered willful, and the employer has the burden of proof to show that it wasn’t. If the court rules that the non-payment wasn’t willful, then the employer will only need to pay the owed paycheck. If it was a late payment, this should already have been paid, and no further action is necessary.
Late payments that may be determined as not willful will be outside of the employer’s control, such as bank errors, or the employer being taken suddenly ill on payday.
State Laws Regarding Paydays
The state and industry you do business in will determine the frequency you pay your employees. An understanding of your state’s paydays laws is important to ensure you do not make costly legal mistakes.
You will be required to pay your employees on one of the following pay frequencies:
Weekly and monthly frequencies are self-explanatory, but bi-weekly is every two weeks, and semi-monthly is twice per month.
Some states can have complex payday laws. For example, Arizona has a semi-monthly payday law but stipulates that there can’t be more than 16 days between paydays.
Occupations may have different pay frequencies in state law. In New York, for example, manual workers are paid weekly, but all other workers are paid semi-monthly. Some states may allow the employer to choose between two pay frequencies. Be sure to check the state’s payday laws so that you are operating legally.
What Happens If I Pay An Employee Late?
While state laws differ regarding the legal penalties for late wage payments, the way your employee handles the situation will affect the penalties too.
An employee must generally follow a procedure when looking to file a late wage claim:
Firstly, the employee must contact you about late payment and give you a chance to resolve the situation. It is in your best interest to resolve the situation swiftly to avoid legal action. If you fail to resolve the situation, or the employee feels you may owe them damages as well (such as covering late payment fees for their bills), then they can contact the labor board to file a claim or go to small claims court.
An employee will usually try and let you resolve the situation first before seeking legal action. A claim or court case will cost you both money and time, which can be easily avoided. It is recommended to take the opportunity to rectify the issue before penalties and interest are required by the court.
A one-off late payment, if rectified will be unlikely to result in a lawsuit. However, claims and lawsuits must be avoided at all costs. Most employees will only file lawsuits if they are repeatedly paid late, or they are not paid what they are owed when they bring it to your attention.