Payments Upon Termination Of Employment: Is Anyone Still Confused?


Unemployed Executive

Most California employers know that an employee who is fired must be paid all of his or her wages, including accrued but unused vacation, immediately at the time of termination. Labor Code sections 201 and 227.3. However, I still encounter some confusion concerning the rules for an employee who quits the job. Does the employer have to pay a resigning employee the same day, or does the employer have additional time within which to pay any final wages?

Labor Code section 202 states that an employee without a written employment contract for a definite period of time who gives at least 72 hours prior notice of his or her intention to quit must be paid all of his or her wages, including accrued vacation, at the time of quitting. If the same employee quits without giving 72 hours prior notice, he or she must be given all of his or her wages, including accrued vacation, within 72 hours of quitting. And employers should take note that the statute clearly specifies 72 hours and not three business days or after the holiday or the next payday, etc.

What are the consequences of a failure to pay the final wages when they are due? Any employer that thinks that a few days of delay won’t matter as long as the final paycheck is correct would be wrong; an employer who fails to pay any wages due a terminated employee in the statutorily prescribed time frame may be assessed a waiting time penalty. The waiting time penalty is an amount equal to the employee’s daily rate of pay for each day the wages were unpaid, up to a maximum of thirty (30) consecutive calendar days. Labor Code section 203. In addition, the prevailing employee would be entitled to collect his or her attorney’s fees, costs and interest on the unpaid wages. Labor Code sections 218.5 and 218.6. All of which can add up to a lot more than the amount of a final paycheck.


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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