Human Resource Blog

California Termination Pay

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	Termination
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We have an employee who is terminating on Monday, August 11/08. We process our US payroll in Canada which means that California rules regarding termination pay turn around time is close to impossible to meet. If we issue a direct deposit on Monday this does mean that she will not get her pay until Tuesday or Wednesday the latest. Does this mean we are not in compliance with CA rules? Would the State not consider that we are doing this in good faith?

We feel your pain. The California rules regarding immediate payment of final wages, including earned vacation, to terminated employees are difficult for many employers to meet. But, the California Department of Industrial Relations expects every employer doing business in the state to have an alternate plan in place, to be sure that the employer complies with the law. Unfortunately, just saying “we cannot do this” is not a justification, in their eyes.

Employees who quit with less than 72 hours notice must receive their final paycheck within 72 hours. Those who give more than 72 hours notice must receive their final paycheck on their last day. Employees who are fired must be paid immediately, meaning right then and there, on the spot. The arrangement you are suggesting is almost certainly a violation of California regulations.

By the way, the California regulations also effectively cancel the employees direct deposit when an employee quits or is fired. Unless the employee requests otherwise in writing, the employee must be given his or her final pay as cash or an actual paycheck, not by direct deposit. This is to prevent exactly the problem you are encountering. Even if the employee does authorize direct deposit, the immediate deadline must be met.

Employers who fail to meet the deadline can be assessed a waiting time penalty. The penalty per day is equal to the employees wages for one day, up to 30 days total. So if your employee does not have access to her money until Wednesday, it is possible that the Labor Commissioner will rule that you must pay her for Monday, Tuesday and Wednesday as a penalty.

Some companies handle this problem by allowing local managers to pay workers in petty cash, or to write payroll checks at termination. In other cases, an employer who knows on Friday that an employee will be terminated at the end of the shift on Monday, would FedEx the employee’s final paycheck – including Monday’s wages — to the supervisor on Friday. The check would arrive on Monday, and the employee could be terminated at the end of the shift Monday.

Another option would be for the employee to be suspended with pay for three days on Monday, while the company draws up a paycheck. Again, the check can be sent by FedEx or overnight delivery to the supervisor. The employee could be terminated on Wednesday afternoon, once the final paycheck is in hand.

Of course, you can also cross your fingers and hope that the California Department of Industrial Relations sees it your way.

Read more about this at: http://www.dir.ca.gov/dlse/FAQ_Paydays.htm