Providing the employees final pay in a timely manner not only makes good business sense but can save you many dollars.

California is a state that strongly advocates the protection of the rights of the employee. California is also one of the most litigious states in the union. Since the labor laws in California are very pro-employee it is imperative that the employer’s actions and procedures are in compliance with the best employment law practices, chief among these would be sure that as an employer provide the employees final paycheck in accordance with the California Labor Law.

Voluntary Termination By Employee:

If an employee chooses to terminate their employment with the company the employer must be sure that the employee has been paid within 72 hours of the voluntary separation of employment.

If the employee is not available to pick up their final paycheck by the 72 hours we encourage employers to send the employee’s final check out via registered mail with a signed receipt required.

Separation of Employment Resulting From Termination By Company:

If the company chooses to separate or end the employee/employer relationship then the employee’s final paycheck must be available by the end of that business day.
If California Employers fail to meet these guidelines the fines and penalties can be quite large. One of the things that California Employers Services recommends to its members is to take the time to put together an Employees Final Pay Spreadsheet. This spreadsheet will detail all aspects of what the employee should receive upon separation of employment.

Make sure that both the employee and the employer agree that the amount of the final check is correct and then have both the employee and the employer sign the document.

Taking this extra step can save an employer a lot when it comes to fines and penalties in the event that the employee was not paid correctly by mistake.

Waiting Time Penalties:

A lot of times an employer will ask California Employer’s Services what happens if I am late paying an employee. When an employer fails to pay an employee in a timely manner they are putting themselves and the company in a very bad position.

The employee can file a complaint with the California Division of Labor Standards Enforcement (DLSE) if they want or they can bypass the DLSE and file a lawsuit.

Should the employee win, he/she will be entitled to the money this is still owed to them as well as waiting time penalties for up to 30 days. Should an employee file a lawsuit this can very quickly turn into a class action lawsuit that could become very costly should other discrepancies be found in the way you are paying your employees as opposed to what is required by law.

Phase Two Waiting Time Penalties:

Waiting time penalties are levied on employers when the employer fails to pay the employee’s final wages when they are due. The penalty is the employee’s average daily wage for each day the employer fails to pay with the maximum penalty set at 30 days. Here is an idea of how this would work if you as the employer withholds the employee’s final pay for two weeks. The employer would then have to pay a penalty equal to the employee wages for each day of those two weeks.
Waiting time penalties are based on the employee’s steady rate of pay, including overtime that is normally worked. The waiting time penalties formula is based on regularly scheduled overtime and commissions, and bonuses.

Here are some of the rules that apply when calculating the rate of pay:

• If an employee works five days a week, eight hours a day, the employee’s waiting time penalty is eight times the employee’s hourly rate for each day the employer is late.
• For those employees that work part time, the penalty is based on the average hours worked.
• Overtime is calculated if it is part of the normal work schedule.
• Irregular or occasional overtime is not included in the employee’s wages. On the other hand if, the employee normally worked a 50 hour work week, the employee’s penalty would then be established on a ten-hour day and would contain the overtime premium.

There is one exemption to the waiting time rule. If the employee and the employer have a good faith disagreement about whether you are owed money, the employer may not be subject to waiting time penalties.

In conclusion, I would encourage all employers to make sure they are in compliance with both Cal-Osha and California Labor Laws. Having been in the business of helping employers to get in and stay in compliance this is the first time that I have ever gotten the impression that the DLSE and Cal-Osha want employers to have a consultant helping them to make sure they are compliant.

While it does take more time and effort to comply with both state and federal laws it is very much worth that time. I am actually seeing employers begin to understand that and that is a good thing because fines and class action lawsuits cost so much to defend even if you win.

References:
http://www.dir.ca.gov/dlse/faq_waitingtimepenalty.htm
http://www.cdflaborlaw.com/_images/content/A_Win_2-9-09.pdf