Find out how long an employer can hold your check after termination and when final wages must be paid. Review California final paycheck deadlines for firings, layoffs, resignations, temporary work, commissions, and certain industries.
By Brad Nakase, Attorney
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You may be exposed to waiting time fines if you don’t give a terminating employee their last paycheck on schedule. The amount of time needed to compensate the employee is determined by several factors.
This guide explains how long an employer can hold your check after termination under different state laws.
The amount of time needed for the final paycheck usually varies depending on whether the worker was fired or laid off, quit without notice, or quit with a minimum of 72 hours’ notification. The final paycheck time standards do, however, have a few specific exceptions. Make sure to get a copy of the last paycheck acknowledgment signed by departing employees.
Many employees wonder how long an employer can hold your check after termination. All accrued vacation time and wages are due and payable right away if you fire a staff member or lay them off without a specified return date during the regular pay period. Asking or requiring an employee to postpone receiving their last paycheck until the following regular payday is unacceptable. A final paycheck cannot be withheld. Withholding a final salary to persuade a former employee to:
An employer cannot use these reasons to withhold pay.
You can pay the employee’s earnings on the following regular payday if there is a termination with the usual return to job date within the period of pay.
Paying off vacation time when employees are laid off indefinitely is the subject of a current court case. Although employees were placed on furlough in March, it did not become final until June of the very same year, at which point all accrued underutilized vacation time got paid out. Because the workers should have received their earned vacation time in March, the court decided that they were entitled to thirty days of waiting time damages.
State laws determine how long an employer can hold your check after termination. Employees must receive all unpaid and earned pay at the moment of termination from their current position, according to the California Labor Code. You may be subject to waiting time fines if they don’t.
The California Supreme Court held in Smith vs The Superior Court (Los Angeles County) that this need is unaffected by the length of employment or the grounds for termination. A worker’s service to a company ends when they finish the work for which they were employed or when the employer terminates them. According to the legislation, both qualify as discharges. An involuntary dismissal from a continuous employment connection is not necessary for the “discharge.” Payment for an employee hired for a single day of work must be made at the conclusion of that day.
Before terminating an employee, some employers commonly suspend them to give them time to arrange their last payment or to get one from the company’s out-of-state corporate office or a payroll provider. Except when there is a good-faith disagreement that payments are due, such a practice may result in fines for a deliberate failure to pay final earnings on time. The absence of a good-faith disagreement would likely result in waiting time fees for a worker who could demonstrate that the suspension was only a means of extending the time for final wage payment rather than a valid period for an investigation.
Payment for fired employees must be made at the location of the termination. The worker’s location, and not yours, is where the termination will take place. When you fire a worker who works remotely or is not physically present at the place of business, you need to be ready to give them their last salary as soon as they are informed of their termination. If not, you can be responsible for the employee’s penalties until the day they get their last salary.
You may pay an employee’s final wages by making a direct deposit if they are fired or quit after previously authorizing direct deposit. If you decide to pay by direct deposit, it can be difficult to adhere to the deadlines for providing the terminating employee with their final compensation.
In 2006, California Labor Code section 213(d) was modified to allow final wages to be given by direct deposit without the worker’s separate consent. However, the Labor Commissioner’s Office still needs voluntary consent for the direct transfer of final salary because it hasn’t updated the guidelines on its website.
On the last day of employment, you are required to pay all salary and accrued vacation time if an employee leaves with at least 72 hours’ notification.
The employer’s agency or office in the county wherein the worker has been employed is where final earnings are due.
If an employee leaves with less than 72 hours’ notice, you are required to reimburse all earned earnings and unpaid vacation time within 72 hours following the notice. The 72-hour minimum applies to real clock hours rather than business hours.
If an employee requests it and provides a postal address, they are allowed to get their final salary payment by post if they provide less than 72 hours’ notification. The mailing day is regarded as the payment date for the purposes of the 72-hour obligation.
You may withhold an employee’s last check until it gets picked up unless they expressly request compensation by mail. You may be liable for waiting time fines if you mail the final check without being asked to. The check may be picked up by the employee after it is mailed but prior to it being delivered. The employee will have to wait for a paycheck past the legal date unless you are prepared to draft a second check and halt payment of the original.
Learn More: California Final Paycheck Law: Waiting Time Penalty, Employer Obligations, and Employee Rights
For the reason of final compensation, the California Supreme Court ruled that retirement also qualifies as a “quit” under the Labor Code. A deputy attorney general (State of California) filed a lawsuit alleging she was not paid her last salary and accumulated, unused vacation time within 72 hours of the retirement date. The state contended that since the worker retired rather than “quit,” the final pay provision did not apply.
The Court disagreed, concluding that the term “quit” actually referred to quitting employment and included retirement. According to the Court, retirement is regarded as a “quit” under these Labor Code rules, which means that final salary must be paid on time.
Reimbursement of any costs the worker may have incurred on your behalf is not subject to the final wage payment deadlines. These reimbursements can be issued at the regular payment period.
Wrongful Termination Due to Incorrect Wage Payment
According to the ruling in the Gould vs Maryland Sound Industries case, timely salary payment is a basic California public policy. You risk being accused of wrongful dismissal in breach of public policy if you fire an employee to avoid paying their due wages.
Terminating a staff member who has recently claimed that their wages were improperly paid might result in significant liabilities unless the cause for the termination is well-documented and unconnected to the wage accusations.
The legislation does not mandate severance pay. Providing severance compensation to a fired employee should be done with caution because it may create a precedent for terminations in the future. Failing to provide severance pay to a different employee after paying one could give rise to legal allegations that the later refusal of severance payment was unfair.
Severance compensation is typically not regarded by the EDD as earnings for establishing unemployment insurance eligibility and benefit levels.
California’s last paycheck deadlines have a few narrow exceptions for commissions, temporary workers, and a few particular businesses.
1. Final Payments for Commissions
Commissions are subject to the standard guidelines on the timing of salary payments since they are regarded as wages. When it comes to the schedule of final wages, commissions pose unique challenges. Many commission arrangements postpone compensation payments until a customer pays for a sale.
Therefore, following a commissioned employee’s resignation or termination from employment, a customer’s payment on a transaction may be received. The Labor Commissioner exempts these earnings from the regular final wage payment dates since it is difficult to compute commissions on payments from customers that have not yet been received.
After a former employee’s job relationship ends, you can still provide them commissions. The legislation is ambiguous about whether you may continue paying the former employee on the regular pay plan for all client payments made during that time, or if you have to mail them a check every time a client pays for a sale they made. You might want to discuss this matter with legal counsel. It’s important to know how long an employer can hold your check after termination.
2. Final Compensation for Temporary Workers
Employers are required to pay temporary workers on a daily basis by the conclusion of each workday, including their final day.
Independent of when their job assignment finishes, temporary workers allocated to a “client employer” for fewer than ninety days are often paid on a weekly basis. But ultimate compensation regulations mandate:
3. Final Compensation for Workers in the Concert and Theater Sectors
By collective bargaining, unionized workers in the live theatre and concert sectors who are frequently sent from hiring facilities to jobs at theaters or concerts may discuss deadlines for final wage payments. Waiting time fines will be imposed if the agreed-upon time restriction is broken.
4. Motion Picture Requirements
When an employer fires a worker in the film industry whose unique or unusual terms of employment necessitate additional calculations to calculate the amount owed, the worker’s final earnings may be paid on the subsequent regular payday. A “layoff” indicates that the worker is still qualified to work for that company. Wages must be paid within 24 hours of an employee’s termination, excluding Sundays, Saturdays, and holidays. “Discharge” refers to the employee’s employment being terminated without cause. Payment can be mailed. The date of mailing is regarded as the date of payment.
5. Conditions for Organizations in Professional Sports
Park workers may be paid by professional baseball clubs in California on the following normal paycheck following the conclusion of the season. According to this law, ballpark workers are regarded as constantly employed until they quit or are fired; the end of the season does not automatically result in a termination.
6. Conditions for Print Shoot Workers
Employers of “print shoot employees”—people engaged for a brief period of time to provide services related to a still picture shoot, including digital or film photography, for usage in Internet media, print, or digital—may pay wages due upon termination on the following normal payday rather than right away.
7. Conditions for Fish, Fruit, or Vegetable Canning, Curing or Preservation
When a group of workers is laid off due to seasonal work in the canning, curing, or preservation of fish, fruits, or vegetables, the employer is required to pay all earned and unpaid compensation within 72 hours. If an employee requests payment and provides a mailing address, you must mail it to them.
Regardless of when earnings are collected, payment is considered timely under the rules of this restricted exception if they are mailed within seventy-two hours of the termination.
8. Conditions for Oil Drilling
When a worker or group of workers in the oil drilling industry is laid off, the employer is required to pay all earnings and accrued vacation time within twenty-four hours of the termination, except Saturdays, Sundays, and holidays. When a payment is mailed, the date of mailing is regarded as the payment date.
Gather all timecards and records pertaining to the employee’s unpaid work period when you decide to fire them or receive notification of voluntary termination. Inform the person in charge of issuing the last paycheck of the deadline.
Calculate and, if necessary, prorate the duration of time legitimately worked on the last day of work. Add normal hours, overtime, paid time off that fall within this time frame, sick leave that has been taken, and any accumulated vacation time.
Take into account any additional perks that the employee could be entitled to, such as severance payments, employee costs on your behalf, other employer-issued paid leave (should your policy require that accrued leave be paid to the worker in this situation), etc. Once the amount owed to the employee has been established, compute any necessary deductions, like:
Even if a worker’s debt is covered by a contractual agreement to reimburse the full amount of the obligation on demand, at termination, or in another way, you are not allowed to withhold any amount from their final check that represents the unpaid portion of the debt.
Have the employee sign an affirmation that they got the final paycheck. It is to prove that you fulfilled the last payroll deadline. Additionally, you might ask the worker to ensure that they were paid correctly. Although neither of the documents is necessary, they are useful business records.
Note: You can submit non-negotiated checks to the closest Labor Commissioner office along with a description of your attempts to get in touch with the worker if you possess non-negotiated checks on the books that are made payable to workers whose position was terminated (i.e., since you are unable to find the worker) and you have made every reasonable attempt to pay the wages. The checks will be transferred to the State of California Unclaimed Earnings Fund if the Labor Commissioner is unable to track down the employee to pay the earnings.
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