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Final Pay Explained

October 26, 2022 183

California law requires employees receive their final paychecks within a certain time based on the reason they separated. Failure to meet the set deadline may lead to waiting time penalties, which equates to one day’s pay for each day the employee has to wait, up to 30 days.

Direct deposit

When an employee leaves your practice, the final paycheck must be a live check. No direct deposits are allowed.

Timing of payment

In California, the amount of time you have to provide a final check depends on whether the employee quit or was fired.

Involuntary separation

Employees, who are fired, or laid off, must be paid all wages due at the time, and place, of termination. (Labor Code § 201). If a nonexempt employee is sent home before working at least half of a regularly scheduled shift, the employer must pay the employee for half of the shift (but for no less than two hours and no more than four hours).

Reporting pay chart:

Scheduled Shift Length Hours of reporting time
pay owed to employee
2 2
3 2
4 2
5 2.5
6 3
7 3.5
8 4

Voluntary resignation without 72 hours' notice

Employees, who quit without giving at least 72 hours' notice, must be paid all wages due within 72 hours. An employee may request, in writing, that their final pay be mailed to their home. The date the check is mailed is considered the date of payment. (Labor Code § 202). If the employee does not request that their final wages be mailed to them at a designated address, the place of final wage payment is at the practice in which the work was performed. If not, employee is responsible for picking up the final paycheck at the practice.

Voluntary resignation with at least 72 hours' notice

Employees, who quit and give at least 72 hours' notice, must be paid all wages due on their last day.

What is included:

  • All wages earned
  • All earned but unused vacation/PTO pay
  • There is no requirement under California law to pay earned but unused sick leave
  • Production bonuses are forms of wages in California

Payroll Deductions

The California Department of Industrial Relations says employers may make payroll deductions that are:

  • Required by federal or state law, such as income taxes or garnishments.
  • Authorized in writing by the employee to cover insurance premiums, hospital or medical dues.

Employers cannot make deductions from final pay for:

  • A cash shortage
  • A breakage or loss of company property that resulted from an employee’s mistake
  • An accident
  • Simple negligence
  • Cost of unreturned uniforms, laptops or other company property
  • Owed amounts from a loan (even with a contract) or vacation/PTO advance

Waiting time penalties

An employer who fails to pay any wages due an employee who is discharged or quits within the time frames provided under Labor Code § 201 or Labor Code § 202, may be assessed continuing wages as a penalty from the date the wages were due up to a maximum of 30 days. (Labor Code § 203).

Additional FAQ's

What if an employee doesn’t come to pick up their final paycheck?

Often an employee will not return to pick up a check, in which case an employer might wonder if they need to eventually mail it to the employee.

California law is clear that the final paycheck should be mailed to an employee who quits only if the employee specifically requests that it be mailed and also designates a mailing address.

If the employee does not come in to pick up their final paycheck and never requests that it be mailed, should I mail it anyway just to be sure they get their wages?

No. If you drop it in the mail and then the employee comes in to pick up the check before it arrives at the employee’s home, you will be liable for penalties for late wages for every day the employee then has to wait for the check to arrive.

In addition, if you don’t have a current address on file, the check may go to the wrong address and cause even further penalties to accrue.

Note to employers: If you have an employees final paycheck held in your business which are made payable to employees whose employment has been terminated (i.e., because the employee fails to return and pick up the check or fails to make other arrangements) and you have made all reasonable efforts to pay the wages, you may send the non-negotiated checks with an explanation of your efforts to contact the employee to the nearest office of the Labor Commissioner.  The Labor Commissioner will make further efforts to locate the employee to make payment of the wages and, if unsuccessful, the checks will be deposited into the State of California Unclaimed Wages Fund.  Click here to locate the nearest office of the Labor Commissioner.

If an employee requests that I mail the check, does it have to arrive at the employee’s home within 72 hours?

No. The date of the mailing is considered the date of payment for purposes of the requirement to provide payment within 72 hours of the notice of quitting. So as long as the check is mailed on time, there is no legal violation even though it may take several days in the mail to reach the employee’s home.

First class mail is considered sufficient for mailing, although some employers may choose to use a form of delivery that provides proof of receipt without a signature.

 

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