Under California employment law, all employers have a legal obligation to pay employees the wages they have earned and to pay these wages on time. This includes the final payment of wages upon a worker’s termination of employment.
Per several California Labor Code sections and the state’s labor laws, an employer is subject to penalties if the employer fails to pay an employee on time. For example, as to regular pay, employers are subject to a $100 penalty if they fail to pay an employee on his/her regular payday.
As to overtime pay, an employer is subject to penalties if payment is paid after the date when the employee’s wages are normally due.
When it comes to payment for a final paycheck, California law says that payment must occur:
- on the same day as the employee’s final day of work if he/she is fired or laid off, or
- within 72 hours of the employee giving notice of terminating the employment relationship.
Note that if an employee is not paid on time, the worker can:
- file a complaint with the DLSE (or the California Division of Labor Standards Enforcement), or
- file a lawsuit against the employer.
Note, too, that employers are not always penalized if they fail to pay an employee on time. For example, they can avoid a fine if they were not the true cause of a delay of payment (for instance, maybe the employer’s bank was to blame for the delay).
What is the penalty if a company in California is late in paying its workers?
If an employer cannot justify not paying an employee on his/her regular payday, then it will be charged with a penalty of:
- $100 for an initial violation (for each failure to pay each employee), and
- $200 for subsequent violations.[i]
Under state law, an employer will also be penalized if it willfully or intentionally does not pay an employee’s regular pay on time. The penalty is $200 plus 25 percent of the amount unlawfully withheld.[ii]
In either of the above scenarios, the penalty shall be recovered by:
Note that a company is legally bound to pay an employee’s wages on the regular payday even if there is a good faith dispute regarding the amount of wages owed.
The definition of “regular pay” will depend on the employment relationship between the employer and employee and the rate of pay (either determined by a salary or an hourly rate of pay). Depending on this relationship, the payment of wages may be owed:
- every two weeks,
- on the last day of the month,
- at the end of the day for some daily wage employment situations, or
- at some other pay period as set forth in an employment contract.
When must employers pay overtime pay?
Employers are given a grace period for late overtime wages. A company will not be penalized if the overtime pay is paid no later than the date of the employee’s next regular paycheck.
What are the rules in California on an employee’s final paycheck or final wages?
When an employee is terminated, California’s final paycheck laws say that the employee’s final unpaid wages must be paid immediately upon the time of termination. This includes employees who are fired or laid off for cause, or for no cause at all.[iv]
If an employee quits or resigns without providing prior notice to the employer, the employer generally must provide the employee’s final paycheck within 72 hours. However, if the employee provides at least 72 hours’ notice of his/her intention to quit, the employer has to make final wages available on the employee’s last day of work.[v]
An employee who quits without prior notice can request their employer send his or her final wage payment to a designated address. The 72-hour period to send the final payment is based on the date of mailing.[vi]
“Final payment” includes payment for:
- unpaid wages,
- unused vacation or accrued vacation time, or
- any other time off accumulated by the employee (for instance, vacation days or PTO).[vii]
Note that payment for final wages can be made either:
- in person, or
- via direct deposit.
California employers that violate the above rules will be subject to a waiting time penalty. The waiting time penalty provides an employee with payment equal to one day’s wages for every day of late payment – capped at 30 days.
Can an employer make deductions from an employee’s final payment?
Yes. An employer in California can make any lawful standard deductions from the final payment. Some examples of these deductions include deductions for:
- federal taxes, or
- court-ordered child support.
Employers can also make deductions if an employee:
- stole money or work property, or
- damaged or lost property due to gross negligence.
Are California employers always subject to penalties for late paychecks?
No. Employers are not penalized in every instance of a late paycheck.
In most instances, an employer is not subject to a penalty if it has a valid reason for delayed payment. For example, an employer can avoid a penalty if:
- it was not technically at fault for late payment (for example, maybe a bank caused a delay in payment), or
- the employee failed to provide or incorrectly provided information that was necessary to receive payment.
For a broader discussion, see our article on California paycheck laws.
[ii] See same.
[iii] See same.
[vi] See same.