How Quickly Does an Employer Have to Pay a Terminated Employee?

Employees lose their jobs all the time. Although some must face the unfortunate reality of being unemployed, so long as the employer acted lawfully, an employer has every right to terminate their employees. Nonetheless, the State of California and federal law have specific rules employers must abide by to properly discharge employees and provide them with the proper compensation resulting from that termination. Employees should know their rights under state and federal law to ensure they are appropriately compensated for all hours worked and any additional compensation owed to them.

Timeframe of Final Compensation

California employees are covered under two laws that dictate the rules for payment of an employee’s wages and the organization of hours. These laws include the federal Fair Labor Standards Act (FLSA) and applicable sections of the California Labor Code.

Fair Labor Standard Act

Under regulations created by the U.S. Department of Labor, employers covered under the FLSA are not required to pay employees their final paycheck upon termination immediately. Generally, employers covered under the FLSA will pay employees their final compensation at the end of the most recent pay period when all other employees receive their pay.

Covered employers include employers with two or more employees who earn yearly revenues of $500,000 or more. Covered enterprises also include:

• Hospitals.
• Medical care facilities.
• Nursing homes.
• Schools and preschools.
• Government agencies.
• Enterprises involved in interstate commerce (sale of goods or services across state lines).

California Labor Code

Unlike the FLSA, California maintains much stricter rules for the payment of a terminated employee’s final wages. Under applicable sections of the California Labor Code, terminated employees must receive their final paychecks immediately upon notification of termination. That means when an employee is notified of their discharge from the enterprise, their employer must provide their final check after providing the notification Furthermore, an employer must pay the discharged employee at the place of the employee’s discharge. For example, suppose an employee is a cashier at a grocery store and received their termination notification at the grocery store. In that case, the employee must receive their final paycheck at that grocery store–not another location.

Forms of Compensation Entitled to Employees

Under California law, compensable wages owed to an employee upon their separation from an enterprise include pay for all hours worked; all overtime, time and a half, or double time worked by the employee; and any earned and unused vacation or paid time off (PTO). Employees are not entitled to unused sick time or other compensable time like bereavement leave.

Notification of Departure

Many employees have the ability to terminate their own employment (i.e., voluntarily quitting their position) at any time they choose. However, at-will employees (employees that work for an indefinite period that may be terminated for any lawful reason) that quit their position without providing their employer notice must be paid within 72 hours of notification.

At-will employees who provide at least 72 hours of notice that they are quitting their current position must be paid when their employment relationship with their employer ends. Employees that fail to provide at least 72 hours’ notice may request their final paycheck be mailed to a designated address.

What if an Employer Improperly Withheld an Employee’s Last Paycheck?

Under California law, employers are subject to harsh penalties for improperly withholding an employee’s last paycheck. If an employer does not provide an employee with their last paycheck based on the parameters established under California law, the employer is liable for the unpaid wages.

Furthermore, the employer will have to pay an additional penalty to the employee based on their average daily pay for up to 30 days after the employer fails to pay. Thus, if an employee’s former employer waited 30 days to pay the employee their final paycheck, they are entitled to 30 days of additional compensation as if they worked that time.

Severance Pay Considerations

Under federal and state law, an at-will employee is not entitled to severance pay upon lawful termination of their employment. However, some employees may be entitled to pay if their employer has a policy that provides employees with severance pay if specific requirements are met. Employees should closely review their employer’s personnel handbooks to determine whether their employer offers severance pay and how to qualify.

Unemployment Insurance

California requires covered employers to carry unemployment insurance coverage if or when employees separate from the enterprise under certain circumstances. An employee is entitled to unemployment compensation unless they fall under one of the following categories:

1. The employee voluntarily quit their position without good cause.
2. The employee was discharged from the enterprise because of willful misconduct (an example would be stealing the employer’s property and deviating from the employee’s job duties causing harm to the employer or other employees).
3. The employee refuses suitable work.

Employees denied unemployment coverage but have reason to believe they might be entitled to compensation should contact an experienced California Wage and Hour attorney.

How Can an Attorney Help My Case?

The California Labor Code levies heavy penalties against employers that fail to pay their employees final wages within the timeframes provided under the law. Every so often, employers will try to withhold wages from an employee’s final paycheck, citing all sorts of misconduct allegedly committed by the employee. Employment attorneys are trained to determine whether an employer has a reasonable basis for their claims or is simply trying to pull a fast one on its former employee.

California law allows employers to provide “good faith” evidence that employees should not be paid their final wages. In some instances, an employee may not be entitled to their final wages because they committed some unlawful action. However, employers will try to withhold wages without any substantial evidence of wrongdoing.

By contacting an experienced California Wage and Hour Attorney, employees can ensure they receive their final paycheck and any damages associated with the withholding of that paycheck. In addition, an attorney can help investigate the facts of the case, notify the employer of the pending dispute, contact the California Department of Industrial Relations (DIR) of the employer’s potential misconduct against the employee, negotiate on the employee’s behalf, file a legal or administrative claim for wages, and engage in settlement discusses to ensure final wages are paid.