Final Paychecks: Rules on Employee Compensation After a Resignation or Firing

Let’s be honest, employers: resignations from some employees sting a lot more than resignations from other employees. You hate to see your best people go, and you should do everything reasonable to keep them, but workers simply don’t stay with one job as long as they used to. 

Whether an employee of yours resigns or is terminated, you have to provide them with their final paycheck in a timely manner. Many business owners are surprised at how quickly they must furnish their employees’ final paychecks. Keep reading for the general requirements when it comes to paying someone who no longer works for you. 

Terminated Employees: Pay Them the Same Day

That’s right—in California, employers are typically required to pay employees their wages on the same day they are fired. Many employers hand employees their final paychecks as they break the news of the termination. There are a few exceptions, though, most notably among certain employers in the movie industry or employees working for live performance venues. 

Employees Who Resign: The 72-Hour Rule

When an employee of yours gives you their resignation notice, you have 72 hours to give that employee their last paycheck. If your employee gives you the standard two-week notice, though, you have to give that employee their last paycheck on their final day of work (assuming they continue to work until that day). The 72-hour rule applies to employees who are not otherwise on a work contract for a certain period of time, though there may be exceptions there. 

Note: If you offer your employees paid time off, don’t forget to compensate them for unused vacation days on their last paycheck!

Penalties For Not Distributing Final Paychecks

The penalty for not giving departed employees their final paychecks in the required timeframe is fairly straightforward. For each day your former employee is owed their final paycheck and doesn’t receive it, you will have to pay that employee as if they are still working. 

So, let’s say an employee quits on the spot. This obviously leaves you in a bit of a bind, and you decide to not give that employee their final paycheck until you hire a replacement. A few days later, you rethink your position and send that employee the final paycheck. By that point, though, 168 hours have passed since that employee quit. If that employee pursues a claim against you, you will have to pay that employee for four extra days of work (168 – 72 = 96 hours, which has a total of 32 working hours) in addition to the wages your employee actually earned. Workers who aren’t given their final paychecks can get compensated for up to 30 days of waiting. 

Conclusion

Employee turnover is a part of running a business—especially in the 21st century. Before you hire your first employee, make sure you have a documented system for giving final paychecks to anyone you hire. This isn’t a terribly onerous task for most employers, but many are surprised at how quickly California employees must receive their final wages and how expensive it can be if they miss that window. 

Integrated General Counsel is focused on helping business owners keep track of the myriad legal requirements that must be met so their companies can be secure for the long haul. We help businesses at every phase of their growth and development, and we’d be honored to discuss your options with you and your team. Call us at (925) 399-1529 to set up an initial consultation.