4 Mistakes Employers Make in Timing of Employee Pay

Employers must compensate nonexempt employees at least twice during each calendar month and compensate exempt employees at least once per calendar month.

California Labor Code 204 requires that the employer establish a regular payday and post a notice that shows the day, time, and location of the payment.

Organizations may utilize direct depositor debit cards for wages due only if the employee has voluntarily authorized it.

If the regular payday falls on a weekend or on a holiday, as listed in the California Government Code, and the organization is closed on that day, payment may be delayed until the next business day. Exceptions would be pay periods agreed to under a valid collective bargaining agreement (Union Agreement).

Regular Pay

Employers must pay for hours worked between the first and the fifteenth (15th) of the month by the twenty-sixth (26th) day of the month. Wages earned between the sixteenth (16th) and the last day of the month must be paid by the tenth day of the next month in which the employee worked.

The exception to this would be pay periods agreed to under a valid collective bargaining agreement. Pay periods other than what is listed above, such as weekly, biweekly, or semimonthly, are permissible as long as the payment is made within seven days of the end of the pay period [Labor Code sec. 204(a)(b)]. Exempt worker salaries can be paid once monthly if payment is made on or before the twenty-sixth (26th) day of the month. This pay schedule will include pay for the unearned portion between payday and the end of the month.

Bonuses

Since bonuses are treated as wages under California Labor Code Section 200, employers need to be sure they are properly paying them out. To start, all bonuses should be listed on the employee’s wage statement and should have the necessary withholdings made. Non-discretionary bonuses, those earned by completing certain performance indicators, should be included under the employee’s regular rate of pay when it comes to calculating overtime pay. Lastly, any earned and unpaid bonuses should be included in the final pay of terminating employees.

Overtime

Whereas regular payment must be made pursuant to the above schedule(s), overtime payment may be delayed to the next pay period after it is earned. If overtime payment(s) are delayed, those wages should be listed as a correction on the wage statement’s itemization and identified by the date of the pay period from which they were earned.

Final Pay

California regulations specify when employees need to receive their final compensation. Under California law, an employee who is terminated involuntarily (i.e. a discharge or layoff) is due all unpaid wages immediately, including accrued and unused vacation and/or paid time off.

Employees who quit with at least seventy-two (72) hours’ notice are required to be paid all unpaid and due compensation by their last day of employment. Employees who quit with less than seventy-two (72) hours’ notice are required to be paid within seventy-two (72) hours of when notice was given, and payment must be ready and available for the employee to pick up at the employer’s place of business.

Employers terminating or laying off employee(s) are required to provide all final pay at the place of employment and on the day of termination/layoff. If an employer uses Direct Deposit, the employee can authorize their final pay to be deposited via that direct deposit option.

Penalties for Failing to Pay Proper Wages

An organization can be subjected to penalties for not paying proper wages to their employee(s).

An employer that does not furnish final payment to terminated employees may be assessed a “waiting time” penalty equal to the employee’s regular rate of pay for each day that payment remains unpaid, for a total of thirty (30) days.

Employers will not be assessed this penalty if they can show that they made good faith attempts to provide the employee with this pay, and the employee avoided or refused to receive the payment.

Beginning in 2020, employees are now able to directly sue their employers for unpaid wages under AB 673. Previously, employees were only able to recoup these penalties under a PAGA claim, which explained earlier requires 75% of the penalties to be paid to the state. Now employees can retain the complete penalty as described above.

SB 688, also allows employees to recoup wages when their employer “pays or causes [an employee] to be paid a rate of compensation that is less than set by contract.” Contract wages are defined in the bill as “wages based upon an agreement, in excess of the applicable minimum wage, for regular, non-overtime hours”. Thus, SB 688 uses broad language for which a penalty can apply to any rate of pay for any contract.

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