FAILURE TO PROMPTLY PAY WAGES WHEN AN EMPLOYEE IS DISCHARGED OR QUITS CAN BE VERY COSTLY

Employers and employees should all be aware of the severe penalties which can be imposed for the employer’s failure to promptly pay all wages due when an employee is discharged or quits.  The following are the general rules under California law governing such payments (some exceptions exist).

Any wages earned by an employee but unpaid at the time the employee is discharged are due and payable immediately upon discharge.  Labor Code § 201.  Where an employee voluntarily quits, his or her earned wages must be paid on the last day of work, unless the employee has given less than 72 hours’ notice, in which case any unpaid wages must be paid within 72 hours of the employee’s last day of work.  Labor Code § 202(a).

Failure to promptly make final wage payments can result in what are called “waiting time penalties.”  If an employer “willfully” fails to pay wages when due to an employee who is discharged or quits, the employee’s wages continue at the same rate until paid or until suit is filed, but not for more than 30 days.  Labor Code § 203.  This also applies where the employer fails to pay overtime wages due.

“Willful” failure to pay occurs “when an employer intentionally fails to pay wages to an employee when those wages are due.”   8 Cal. Code Reg. § 13520.  Generally, an intentional failure does not mean that the employer must be acting in bad faith or have an ill motive, but simply that the employer failed (or refused) to perform an act which it was required to perform.  However, “a good faith dispute that any wages are due will preclude imposition of waiting time penalties.”  8 Cal. Code Reg. § 13520.

Significantly, Labor Code section 203 penalties are daily penalties (up to the maximum of 30 days).  In other words, the penalty days are not calculated based on how many days the employee generally worked during a 30-day period.  So, for example, if an employee earning $10 an hour is not paid all wages due until, say, 31 days after discharge, that employee can recover $80 as a daily penalty for 30 days, or $2,400!  The calculations can become more complicated where commissions, bonuses, or piece-rate compensation are added in, but you get the idea – it’s a lot of money.

In my practice (Website; Email) I have dealt with these issues repeatedly, and it never ceases to amaze me how many employers fail to comply with the duty to promptly pay all wages when their employees quit or are discharged.

If you’re an employer, pay all wages due promptly when an employee is discharged or quits.  And if you’re an employee, and you believe you have not been paid all wages due, you may be owed more than you think.

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