Failing to provide a terminating employee with their final paycheck in a timely manner can subject you to waiting time penalties. The time requirement to pay the employee depends on a number of factors.
The time requirement for a final paycheck generally depends on whether the employee quit without notice, quit with at least 72-hours’ notice or was terminated or laid off. However, there are certain limited exceptions to the final paycheck timing requirements. For more information, see “Final Pay Timing Exceptions” on this page.
The Final Paycheck Worksheet can assist you in this process. Be sure to ask terminating employees to sign a copy of the Final Paycheck Acknowledgment.
This topic contains the following information:
If you terminate an employee or lay them off with no specific return date within the normal pay period, all wages and accrued vacation earned but unpaid are due and payable immediately.1 It is not acceptable to ask or require an employee to wait until the next regular payday for their final wages. You cannot withhold a final paycheck. It is illegal to withhold a final paycheck to induce the former employee to:
If there is a layoff with a return to work date within the pay period and the employee is scheduled to return to work, you can pay the wages at the next regular payday.2
A recent court case highlights paying out vacation time when indefinitely laying off employees ― although employees were furloughed in March, the furlough didn’t become permanent until June of the same year, which is when all accrued, unused vacation time was paid out. The court ruled that the employees were owed 30 days of waiting time penalties because they should have been paid accrued vacation hours in March.3
The California Labor Code requires that employees receive all earned and unpaid wages at the time of termination from employment. If they do not, you can be assessed waiting time penalties.
In Smith v. The Superior Court of Los Angeles County, the California Supreme Court ruled that neither length of employment nor reason for termination changes this requirement. An employee’s service to an employer is completed either by completion of the hired-for task or at termination by the employer. Both constitute a discharge as defined by law. The “discharge” does not require an involuntary termination from an ongoing employment relationship. An employee hired to perform one day of service must be paid at the end of that day.4
Some employers routinely suspend employees before termination to have time to prepare a final paycheck or to receive one from a payroll service or the employer’s out-of-state headquarters. Such a practice can result in penalties for a willful failure to pay final wages on time, unless there is a good-faith dispute that any wages are due.5 An employee who could show that their suspension was merely a way to extend the time for final payment of wages, rather than legitimate time for an investigation, would probably be awarded waiting time penalties due to the lack of any good-faith dispute.
Terminated employees must be paid at the place of termination.6 The place of termination is the employee’s location, not yours. If you terminate an employee who is not at your place of business, such as an employee who works remotely, you must be prepared to deliver the final paycheck at the moment the employee is notified of the termination. Otherwise, you may be liable for penalties to the employee up until the date that they will actually receive their final pay.
If an employee who previously authorized direct deposit is discharged or quits, you may pay final wages by direct deposit to the employee. However, you must observe the time limits for making final pay available to the terminating employee, which can be challenging if you are paying by direct deposit.7
If an employee quits with 72-hours’ notice or more, you must pay all wages and accrued vacation earned but unpaid on the last day of work.8
Final wages are due at the office or agency of the employer in the county where the employee has been working.9
If an employee quits with less than 72-hours’ notice, you must pay all wages and accrued vacation earned but unpaid within 72 hours after notice is given. The 72-hour requirement is actual clock hours, not business hours.
An employee who gives less than 72-hours’ notice is entitled to receive their final wage payment by mail if they so request and designate a mailing address. For purposes of the 72-hour requirement, the mailing date is considered the payment date.10
Unless the employee specifically requests payment by mail, you may hold their final paycheck until it is picked up. Mailing the final paycheck without a request to do so could subject you to waiting time penalties. The employee could show up to pick up the check after it has been mailed but before it is delivered. Unless you are willing to write a duplicate check and stop payment on the original, the employee will be forced to wait for their wages beyond the legal deadline.
The California Supreme Court decided that a retirement also constitutes a “quit” under the Labor Code for purposes of final pay.11 The case involved a deputy attorney general for the state of California who claimed she did not receive her final paycheck for wages and accrued, unused vacation within 72 hours of her retirement date. The state argued that the employee did not “quit,” she retired and so the final pay rule did not apply.
The Court disagreed, finding that the word “quit” really spoke to the person leaving a job and encompassed retirement. The Court held that a retirement is considered a “quit” under these provisions of the Labor Code and triggers the timely payment of final wage requirements.
The payment deadlines for final wages do not apply to reimbursement of expenses that the employee may have incurred on your behalf. Those reimbursements can be made at the normal time for payment.12
The case Gould v. Maryland Sound Industries, Inc., held that prompt payment of wages is a fundamental public policy of California. Terminating an employee to avoid paying due wages subjects you to the claim of wrongful termination in violation of public policy.
Severance pay is not required by law. Be cautious when giving severance pay to a terminated employee because it can set a precedent for future terminations. After paying one employee severance pay, failure to do so for another employee could invite legal claims that the subsequent denial of severance pay was discriminatory.
The EDD does not usually consider severance pay as wages for purposes of determining eligibility for and benefit levels related to unemployment insurance.
There are certain limited exceptions to California’s final paycheck deadlines for commissions, temporary employees and a few specific industries.
Commissions are considered wages, covered by the normal rules about timing of wage payments. However, commissions present special issues regarding the timing of final wages. Many commission plans delay payment of commissions until payment for a sale is received from a customer. Therefore, receipt of a customer’s payment on a sale can occur after a commissioned employee quits or is terminated from employment. The Labor Commissioner recognizes that it is impossible to calculate commissions on customer payments not yet received and exempts these wages from the normal final wage payment deadlines.
You can continue to pay out commissions to a former employee after the employment relationship ends. The law is unclear as to whether you must send the former employee a check each time a customer pays for a sale that they had made, or whether you can continue to pay them on the normal pay schedule for all customer payments made within that period. You may want to consult with legal counsel about this issue.
For more information, see Commissions.
Employers must pay temporary employees who are assigned work on a day-to-day basis by the end of each work day, including their last day of work.14
Temporary employees who are assigned to work for a “client employer” for less than 90 days are normally paid weekly, regardless of when their work assignment ends. For more information, see Timely Payment. However, final pay rules require:
Unionized employees in the live theatrical and concert industries, who are dispatched routinely from hiring halls to jobs at theaters or concerts, can negotiate time limits for final payment of wages through collective bargaining. If the negotiated time limit is violated, waiting time penalties will apply.17
An employer who lays off an employee engaged in the production of motion pictures, whose unusual or uncertain terms of employment require special computation to determine the amount due, can pay that employee’s final wages on the next regular payday following the layoff. A “layoff” means the employee retains eligibility for employment with that employer. If an employee is discharged, payment of wages must be made within 24 hours after discharge, excluding Saturdays, Sundays and holidays. “Discharge” means the unconditional termination of the employee’s employment. You can mail payment. The mailing date is considered the payment date.18
Professional baseball teams in California may pay park employees on the next regular payday after the season’s end. Under this law, ballpark employees are considered continuously employed until the employee quits or is discharged, and the season’s conclusion does not, by itself, constitute a discharge.
Employers of “print shoot employees” — individuals hired for a limited time to render services for a still image shoot, including film or digital photography, for use in print, digital or Internet media — may pay wages owed upon termination on the next regular payday rather than immediately.
An employer who lays off a group of employees because of seasonal employment in the curing, canning or preservation of fruits, fish or vegetables must pay all earned but unpaid wages within 72 hours. You can mail payment to employees who request it and who provide a mailing address.19
Under the terms of this limited exception, payment is timely if you mail wages within 72 hours of the termination, regardless of when they are received.20
An employer in the oil drilling business who lays off an employee or group of employees must pay all wages and accrued vacation due 24 hours after termination excluding Saturdays, Sundays and holidays. If you mail payment, the mailing date is considered the payment date.21
After you make the decision to discharge an employee or you receive a notice of voluntary termination, collect all timecards and documentation about the employee’s unpaid work period. Notify the person who is responsible for issuing the final paycheck of the time constraints.
Use the Final Paycheck Worksheet to calculate and, if applicable, prorate, the amount of time actually worked through the final day of work. Include regular hours, overtime, sick leave that was used and paid holidays that fall in this period, plus any accrued vacation. For more information on calculating vacation pay at the time of termination, see Vacation.
Consider any other benefits that may be due to the employee, such as other employer provided paid leave (if your policy dictates that accrued leave is paid to the employee in this circumstance), severance pay, employee expenses on your behalf, etc. After determining the amount due to the employee, make the proper calculations for any deductions, such as:
You may not deduct from an employee’s final check any amount representing the unpaid balance of a debt owed by the employee, even if the indebtedness is contained in a written agreement to pay the full amount of the debt on demand, at termination or otherwise. For more information, see Employee Debts, Loans, and Deductions.
In addition to the Final Paycheck Worksheet, use the Final Paycheck Acknowledgment or Final Paycheck Acknowledgment - Spanish form to document that the employee received thier final paycheck.
Ask the employee to sign an acknowledgment that they received the final paycheck to document that you met the last paycheck deadline. You can also confirm with the employee that they received proper payment. Neither of the forms is required, but they are good business documentation.
Note: If you have non-negotiated checks on your books which are made payable to employees whose employment has been terminated (i.e., because you are unable to locate the employee) and you have made all reasonable efforts to pay the wages, you may send the non-negotiated checks with an explanation of your efforts to contact the employee to the nearest office of the Labor Commissioner. The Labor Commissioner will make further efforts to locate the employee to make payment of the wages and, if unsuccessful, the checks will be deposited into the State of California Unclaimed Wages Fund. Click here to locate the nearest office of the Labor Commissioner.
1. Lab. Code sec. 201; Campos v. Employment Development Department, 132 Cal. App. 3d 961 (1982)
2. DLSE Enforcement Policies and Interpretations Manual sec. 3.2.2
3. Hartstein v. Hyatt Corp., No. 22-52276 (9th Cir. Sept. 23, 2023)
4. Smith v. The Superior Court of Los Angeles County, 39 Cal. 4th 77 (2006)
5. 8 CCR sec. 13520
6. Lab. Code sec. 208; DLSE Enforcement Policies and Interpretations Manual sec. 7.4.2
7. Lab. Code sec. 213(d)
8. Lab. Code sec. 202
9. Lab. Code sec. 208; DLSE Enforcement Policies and Interpretations Manual secs. 3.5, 3.7
10. Lab. Code sec. 202
11. McLean v. State of California, 1 Cal.5th 615 (2016)
12. DLSE Enforcement Policies and Interpretations Manual sec. 4.3.4
13. Gould v. Maryland Sound Industries, Inc., 31 Cal. App. 4th 1137 (1995)
14. Lab. Code sec. 201.3(b)(2)
15. Lab. Code sec. 201.3(b)(4)
16. Lab. Code sec. 201.3(b)(5)
17. Lab. Code sec. 201.9
18. Lab. Code sec. 201.5
19. Lab. Code sec. 201
20. DLSE Enforcement Policies and Interpretations Manual sec. 3.2.1; Civ. Code sec. 1013(a)
21. Lab. Code sec. 201.7