Our pay periods run from the 11th to the 25th, with the payday being on the 5th of the next month; and from the 26th to the 10th, with the payday being on the 20th. An employee alleges that our pay periods and paydays are not correct. Who is correct?
The employee is correct. You have established a semimonthly pay period, which is perfectly valid, but the problem lies with the timing of the pay dates.
Timing of Pay Dates
The California Labor Code (L.C.) requires that pay dates for weekly, biweekly, and semimonthly pay periods that are different than the schedule outlined in L.C. 204(a) must be designated within seven days from the end of each pay period.
Except for exempt administrative, executive and professional employees, commissioned employees of vehicle dealers and employees covered by collective bargaining agreements, most employees are subject to the provisions of L.C. 204(a), which provides in part that all wages earned by employees are due and payable at least twice each month.
Wages for labor performed between the 1st and 15th of the month are due and payable on an established pay date that must occur not later than the 26th of the month. The designated payday for the second half of the month may be no later than the 10th of the following month.
L.C. 204(d) goes on to provide that the requirements of this section shall be deemed satisfied by the payment of wages for weekly, biweekly, and semimonthly payroll if the wages are paid not later than seven calendar days following the close of the payroll period. Overtime wages for any pay period may be paid on the next regular pay date.
Noncompliance with the payday rules could subject an employer to penalties pursuant to L.C. 210, as well as liquidated damages pursuant to L.C. 1194.2.
L.C. 210 provides a penalty of $100 for each failure to pay each employee and $200 for each subsequent violation, plus 25% of the amount withheld.
L.C. 1194.2 provides for recovery of wages because of nonpayment of the minimum wage. An employee shall be entitled to recover liquidated damages in an amount equal to the wages unlawfully unpaid and interest thereon. When an employer fails to pay wages in accordance with L.C. 204, it amounts to a violation of these laws and results in nonpayment of the minimum wage. The Labor Commissioner may assess liquidated damages based on the current minimum wage multiplied by all unpaid hours in the pay period (except overtime hours).
Considering the potential of sizable penalties, it is prudent to review your pay period and payday practices to ensure compliance with the payday laws.
Additionally, make sure that you are complying with L.C. 207, which requires that employers post a notice specifying the regular paydays and the time and place of payment. The California Chamber of Commerce 2015 California and Federal Employment Notices Poster includes this required notice, which may be purchased from the CalChamber store, www.calchamberstore.com.
The Labor Law Helpline is a service to California Chamber of Commerce preferred and executive members. For expert explanations of labor laws and Cal/OSHA regulations, not legal counsel for specific situations, call (800) 348-2262 or submit your question at www.hrcalifornia.com.