What are the rules regarding the timing of payment of wages in California?
Employers are sometimes faced with financial issues that prevent them from paying their employees on time. When employers pay their employees after wages are due, it often adversely impacts employees who rely on their employers for the timely payment of their wages. In these instances, employees are entitled to several forms of relief.
Timing of Payment During Employment
California Labor Code § 204 sets forth the rules regarding the timely payment of wages for employees currently employed. Employers are responsible for establishing regular pay days on which they pay their employees. Earned wages are due and payable twice during each calendar month. Labor performed between the 1st and 15th days of any calendar month must be paid prior to the 26th day of the month during which the labor was performed. Labor performed between the 16th and the last day of any calendar month must be paid by 10th day of the following month. Employers may instead establish a weekly, biweekly, or different semimonthly payment arrangement as long as all wages are paid seven or less days following the close of payroll.
If an employee falls within the executive, administrative, and professional exemptions, they may be paid their full monthly salary once a month on or before the 26th day of the month during which the labor was performed. Labor Code § 204 (a).
All wages earned are typically due on the designated date of pay for that pay period. However, wages earned for labor in excess of that for the normal work period, such as wages for overtime, may also be paid no later than the payday for the next regular payroll period. Labor Code § 204 (b)(1).
California law mandates that employers provide employees with written notice regarding regularly scheduled paydays at the time of hiring in the language the employer normally uses to communicate employment-related information to the employee. Labor Code § 2810.5 (a). Furthermore, employers are also responsible for providing employees with written notice of any changes to the regularly scheduled payday within seven calendar days after the time of the changes if the change is not listed on the employee’s pay stub for the following pay period. Labor Code § 2810.5 (b).
Payment When Employment Ends
When an employee voluntarily quits or is involuntarily discharged, an employer is responsible for complying with a shortened time period for the payment of all earned wages. If an employee is involuntarily discharged by an employer, the employer is responsible for paying all earned wages, including earned vacation, immediately. Labor Code §§ 201 and 227.3.
If the employee voluntarily quits, the employer must pay the employee all wages due within 72 hours of the employee providing notice of his or her quitting. However, if the employee has provided notice to the employer of his or her intention to quit of at least 72 hours prior to the end of the employee's employment, the employer must provide all earned wages at the time the employee quits. If an employee who quits without providing 72 hours of notice seeks to have his or her final paycheck mailed to a designated address, the employer is in compliance with the law if it mails the payment on the date the payment would otherwise be due. Labor Code § 202 (a).
The industry in which the employee works may also impact the employer’s obligations. An employee engaged in the production or broadcasting of motion pictures whose employment terminates is entitled to receive the payment of the wages earned and unpaid by the next regular payday. Labor Code § 201.5. Employees engaged in the business of oil drilling must be paid within within a “reasonable time” in order to allow their employer to calculate their final wage. A “reasonable time” shall not exceed 24 hours from the time of discharge unless the discharge occurs on a Saturday, Sunday, or a holiday, in which case the employer is given additional time. Labor Code § 201.7.
If an employer discharges an employee or the employee quits, the employer may pay the employee his or her final wages by making a payment using direct deposit when this form of payment is authorized by the employee. Wages must still be paid in accordance with the foregoing timing requirements. Labor Code § 213 (d).
Penalties for Non-Compliance
An employee who has not been timely paid may pursue legal action to recover his or her unpaid wages. The employee may additionally recover a number of penalties from his or her employer.
When an employer willfully fails to timely pay an employee who is discharged or voluntarily quits, the employee is entitled to waiting time penalties. Labor Code § 203. In order to calculate waiting time penalties, one must first determine the employee’s daily rate of pay. The employee’s daily wages then continue each day, for a period not to exceed 30 days, until the employee is paid. For example, if an employee earns $200 per day, and the employer fails to pay the employee for ten calendar days after the employee was discharged, the employer will then be responsible for paying the employee waiting time penalties of $2,000.
Employers may be also be subject to actions under the Private Attorneys General Act (PAGA). PAGA actions allow employees to enforce civil penalties, which would otherwise only be enforced through an action by the state. In a PAGA action, an employee seeks to collect civil penalties for himself and other aggrieved employees by bringing a lawsuit on behalf of the state. Upon resolution of the matter, the employee receives 25% of the penalties with the remaining 75% going to the state. The penalties in a PAGA action can be substantial.
In additional to the penalties, prevailing employees are entitled to attorneys’ fees and the costs of litigation in bringing these actions.
Employers and employees often have questions regarding whether the timing of payment practices is compliant under California law. If you have further questions, please feel free to contact our firm. We are happy to discuss how we can assist you.