All wages and accrued vacation or paid time off (PTO) earned but unpaid are due and payable:
• Immediately when an employee is terminated;
• On the last day of work for an employee who quits with 72-hours notice or more; and
• No later than 72 hours after notice is given for an employee who quits with less than 72-hours notice.
The 72 hours is clock hours—not business hours. You are not required to pay accrued but unused sick leave upon termination unless your sick leave is incorporated into a PTO policy.
Penalty for Missing Timeline
If you fail to meet these timelines, you will be responsible to pay an employee one day of pay for each day the final pay is late, up to a maximum of 30 days.
If your payroll company is out of state or unable to cut a check to meet these timelines, any form of payment is acceptable—you can run the payroll, determine how much is owed and pay the employee that amount by check, money order, or cash. Payroll can handle the deductions later. If the employer pays in that manner, the employee must still receive an itemized statement. It can be handwritten or typed on a piece of paper if need be. Otherwise, the employer is subject to cash pay penalties in Labor Code Section 226.3. Ensure you get a signed receipt from the employee if you must follow this process.
If you have an employee’s final pay but the employee never picks it up, you may submit it to the local Division of Labor Standards Enforcement (DLSE) office as unclaimed wages.
Specifically, the DLSE provides: If you have non-negotiated checks on your books and the checks are made payable to employees who have left your employment and whom you cannot locate, you may send the Labor Commissioner the non-negotiated checks, along with an explanation of your efforts to contact the employee.
The Labor Commissioner will try to locate the employee and make payment of the wages. If these attempts are unsuccessful, the checks will be deposited into the State of California Unclaimed Wages Fund.
You also may use direct deposit if the employee has provided written authorization for you to do so for final pay.
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.