Timing Is Everything: California’s Golden Rule

California law differentiates final wage timing based on how employment ends.

1. Terminated Employees

If you fire or lay off an employee, you must provide their final paycheck immediately at termination.

The final paycheck must include:

•All wages earned through the last day

•Accrued and unused vacation or PTO

•Earned commissions and bonuses

•Outstanding expense reimbursements

Pro tip: Prepare checks or ensure same-day electronic payment capabilities for planned and unplanned terminations.

2. Employees Who Quit

Timing depends on the notice provided:

•72+ Hours Notice: Pay all earned wages, including accrued vacation, on the last day of work.

•Less Than 72 Hours Notice: Pay all wages within 72 hours of quitting. The clock starts when the employee resigns.

Exception: If the employee requests payment by mail, the mailing date counts as the payment date—but only if mailed within 72 hours.

3. Special Industry Exceptions

Certain industries have unique rules:

•Seasonal agricultural workers: 72 hours after layoff

•Motion picture employees: Next regular payday

•Oil drilling layoffs: 24 hours (excluding weekends/holidays)

•Union employees in live theater/concerts: Per collective bargaining agreements

What Must Be Included in the Final Paycheck

California law requires inclusion of:

•Regular wages, overtime, and double-time hours

•Accrued vacation or PTO (if your policy provides it)

•Earned commissions and bonuses

•Expense reimbursements

•Unpaid meal/rest break premiums (if violations occurred)

Exclusions: Paid sick leave is not required unless promised by company policy.

What Cannot Be Withheld

Employers cannot delay or condition final wages for:

•Unreturned company property (phones, computers, uniforms)

•Signing separation agreements

•Repayment of loans

•Alleged damages to equipment (except in limited circumstances)

Permissible deductions:

•Standard tax withholdings

•Court-ordered garnishments/child support

•Property damage due to gross negligence or theft

Waiting Time Penalties: Why Delays Are Costly

California enforces timely payment through waiting time penalties, which accrue daily at the employee’s full daily rate for up to 30 calendar days.

Key points:

•Penalties accrue even on weekends and holidays

•Maximum exposure: 30 days of wages

•Applies when the employer willfully fails to pay, which includes accidental delays under the employer’s control

Examples

Example 1 – Fired Manager:

•Daily wage: $200

•Final paycheck 15 days late

•Penalty: $3,000

Example 2 – Retail Worker:

•Daily wage: $144

•Final paycheck 16 days late

•Penalty: $2,304

Example 3 – Salaried Employee:

•Daily wage: $288.46

•Final paycheck never provided (45 days later)

•Penalty: $8,653.80 (capped at 30 days)

The Good Faith Dispute Exception

A good faith dispute can prevent penalties if the employer can demonstrate:

•A reasonable disagreement about wages owed

•Legal or factual basis backed by evidence

What doesn’t qualify:

•Disagreements without evidence

•Payroll or administrative issues

•Arguments in bad faith

Note: Any undisputed wages must still be paid immediately.

Real Costs of Non-Compliance

Direct costs:

•Unpaid wages

•Waiting time penalties

•Attorney’s fees

•Court costs and interest

Indirect costs:

•Management time

•Increased insurance premiums

•Regulatory scrutiny

•Reputational damage

Multiplier effect: Multiple affected employees can exponentially increase financial exposure.

Best Practices for Employers

1. Create a Clear Final Paycheck Procedure

•Assign responsibilities and backup plans

•Document calculation and payment steps

2. Maintain Accurate Vacation/PTO Records

•Use payroll software for accrual tracking

•Verify balances before termination

3. Prepare Checks in Advance

•For planned terminations, prepare wages and bonuses ahead of time

4. Establish Emergency Payment Capabilities

•Keep blank checks

•Ensure same-day electronic payment

5. Train Management Teams

•Ensure managers understand immediate payment and 72-hour rules

6. Use Clear Vacation/PTO Policies

•Written policies prevent disputes

•Include accrual, caps, and termination calculation rules

7. Document Everything

•Keep records of termination/resignation dates, paycheck issuance, and disputes

8. Pay Promptly in Case of Doubt

•Pay undisputed amounts immediately

•Escrow disputed amounts while consulting legal counsel

Conclusion

California’s final paycheck laws are strict but clear:

•Immediate payment for terminations

•Within 72 hours for resignations

•Waiting time penalties accrue daily, up to 30 days

For small and medium-sized businesses, compliance is critical. Implementing proper procedures, training managers, and paying promptly protects your company from penalties, legal fees, and reputational damage. Bottom line: When it comes to final wages in California, on time is the only acceptable time.