Final Pay Facts: How To Pay So That You Don’t Pay


checkA few months ago I posted a blog article that outlined the basic rules on when a terminated or resigning employee must be paid his or her final wages in the State of California (“Payments Upon Termination of Employment: Is Anyone Still Confused?”).  However, while an employer may now understand when an employee must be paid, where and how should the payment take place? Should the payment be mailed to the employee who has abandoned his or her job or is it permissible for the employer to hold the final paycheck until it is contacted by the former employee? Can the final paycheck be delivered by direct deposit pursuant to an existing direct deposit agreement with the employee? The answers to these questions are important; the failure to pay the employee his or her final wages in a timely fashion will expose the employer to a penalty equal to the employee’s daily rate of pay for up to 30 consecutive days pursuant to Labor Code section 203, plus interest and attorneys’ fees under sections 218.5 and 218.6.

The place where the final wage payment for employees who are terminated should be made is the location of the termination. This is also true for resigning employees who have given at least 72 hours notice of quitting; these workers should be paid in person at the location where the termination of employment takes place. The place of final wage payment for employees who quit without giving 72 hours prior notice is at the office of the employer within the county in which the work was performed, with such payment taking place within 72 hours of the employee’s quitting. However, the quitting employee may request that his or her final wages be mailed to a designated address. Labor Code Section 208. The date of mailing will be considered the date of payment for purposes of the employer’s compliance with the statutory requirement to provide payment within 72 hours of the notice of quitting. Labor Code Section 202.

As for direct deposits, direct deposits of wages to an employee’s bank, saving and loan, or credit union account that were previously authorized by the employee are immediately and automatically terminated when an employee quits or is discharged. Accordingly, the rules on where the payment of final wages upon termination of employment should take place will apply. However, an employer can directly deposit the employee’s final wages if the employee has voluntarily authorized the deposit and provided that the employer makes the payment in a timely fashion. Labor Code Section 213(d).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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