California has strict laws about when you need to pay employees. If you have a California dental, medical, optometric, or veterinary practice, you need to be aware of how California wage and hour laws apply to your practice. California’s state employment laws are often more stringent than federal law so, for California employers, being in compliance with federal law is not always enough
One aspect of California employment law covers when you have to provide a final payment for employees who are leaving your employment. There is one set of rules for employees who have been fired, laid off, or otherwise terminated and another set for employees who voluntarily quit.
You may be charged with penalties -- commonly called “waiting time penalties” -- if you willfully fail to give the employee their full final payment on time, according to the time limits set out in California law. Waiting time penalties equal one day of the employee’s average daily wage for every day that the final paycheck is late, up to 30 days maximum. Every day that payment is delayed counts, not only the days when the employee would have been working. In addition, you may be charged interest on unpaid wages and the employee’s court costs, and attorney’s fees if the employee files a lawsuit.
You need to be prepared with systems and procedures that will help ensure that you stay in compliance with state, local, and federal employment laws and regulations and that none of the many rules get overlooked or fall through the cracks.
To avoid paying waiting time penalties that could amount to thousands of dollars, you will need to:
1. Pay terminated employees immediately
If an employee is involuntarily terminated for any reason -- or for no reason at all -- then, as an employer, you must pay them their final paycheck immediately at the time they are fired or laid off. You can’t wait until the next regular payday. You can’t even wait until the next day. Also, you must pay them at the place where they were discharged, unless they ask for a check to be mailed or have a pre-existing authorization for direct deposit.
2. Know when to pay employees who have quit
The rules for paying employees who voluntarily quit depend on how much notice the employees give. If they give less than 72 hours' notice, you have to pay them within 72 hours. If they give 72 hours or more notice, you must pay them on their last day of work.
3. Know what must be included in the final paycheck
The final paycheck for both employees who are terminated and those who quit must include all unpaid wages plus payment for all accrued and unused vacation time and paid time off.
Using a company like HR For Health can help you keep track of payroll-related tasks.
In California, you are not required to provide vacation pay. But if you do, then you must, with a few exceptions, pay any accrued and unused vacation time to employees as part of their final paycheck. Also, note that “use it or lose it” vacation time policies are not legal in California, and all accrued time must be paid.
If you combine vacation pay and sick leave into a single paid time off benefit, then the paid time off is treated the same way as vacation pay -- any accrued and unused time must be paid when the employee leaves. Vacation pay and paid time off must be paid at the employee’s current rate of pay.
You can’t require an employee to sign a release of liability or a waiver of rights as a condition of their getting their final paycheck. It’s actually a misdemeanor for an employer to require a release in these circumstances. There’s an exception if there is a good faith dispute about wages owed, and the employer and employee agree on a compromise.
There are a few exceptions where the final payment rules don’t apply. These include when the departing workers are temp agency workers or when they are employees with a collective bargaining agreement that includes provisions on how to handle final payments.
Another exception is if there is a genuine dispute about the amount of the wages that the employer owes the employee. To avoid being subject to waiting time penalties in this situation, employers will have to show that they acted in good faith and will also need to pay on time any portion of the wages that are not being disputed.
If you don’t make the final payment to a terminated employee at the required time, you will be violating California’s wage and hour laws. The employee has the right to file a wage and hour claim or bring a lawsuit against you.
California’s rules for final payments are just one set of rules within the wage and hour universe of rules that mandate when employers must pay wages. There are strict rules for when payment must be paid throughout an employee’s employment, not just at the time they are leaving.
The general rules are that for non-exempt employees:
Trying to keep up on your own with the level of detail that exists in these laws, not to mention trying to keep up with all the changes and new laws and regulations, would take valuable time away from your practice. You can rely on the employment lawyers at Dental & Medical Counsel to help you get and remain in compliance with all the applicable California, federal, and local wage and hour laws. Contact us today to set up a complimentary consultation with attorney Ali Oromchian.
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