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State Penalized for Failing to Timely Pay Final Wages

Prompt payment of final wages. It’s not just a good idea. It’s the law. The State of California apparently didn’t get the memo on that one. The California Supreme Court had to tell the state that retiring employees are entitled to their final wages on their last day of employment. Labor Code sections 202 and 203, requires employers to make prompt payment of the final wages owed to employees who quit. Failure to timely pay final wages allows a court to impose statutory penalties. In McLean v. State of California, a retired deputy attorney general, sued the State of California on behalf of herself and a class of former state employees who did not timely receive their final wages when they quit or retired.

The state argued that sections 202 and 203 do not apply when employees retire. It also argued that McClean should have sued the state agency for which she worked instead of the State. The court concluded that:

Labor Code sections 202 and 203 apply when employees retire from their employment. We also conclude that McLean‟s decision to name the State of California as a defendant rather than the Department of Justice is not a basis for dismissing her suit.

When Are Final Wages Due?

For most California employees, final wages are due immediately upon termination (Labor Code section 201). It does not matter whether the employee is fired or laid off. If the employer is the moving party (i.e., the one to end the relationship) then it is a termination.

In contrast, California employees who quit their employment without notice must be paid within 72 hours of his last day of work(Labor Code section 202). There is an exception when an employee provides at least 72-hours notice. In that case, the final wages are due on the last day of employment.

There are some slightly different rules for:

Penalties for Failing to Timely Pay Final Wages

Employers willfully failing to timely pay final wages pay a penalty. (California Labor Code section 203). And don’t forget that “wages” includes accrued vacation or PTO (but not paid sick leave in most cases).

This “waiting time” penalty is calculated by multiplying the employee’s daily wage by the number of days until the employee is paid. There is a 30-day maximum on the waiting time penalties, but the penalty is imposed every day–not just every working day. There are a lot of cases where the penalty exceeds the actual wages owed. The penalties are almost mandatory unless an employer can show a good faith dispute that the wages were owed.

As the State of California just learned, employees must promptly receive their final wages. Employers cannot hold the wages hostage pending return of the employer’s keys or other equipment. If you have questions about California wage and hour issues, call an experienced employment attorney.

Original article by Robert E. Nuddleman of Nuddleman Law Firm, P.C.

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The Nuddleman Law Firm, P.C. represents employees and businesses throughout Silicon Valley and the greater San Francisco Bay Area including Pleasanton, Oakland, San Ramon, Hayward, Palo Alto, Menlo Park, Mountain View, Los Altos, San Jose, the South Bay Area, Campbell, Los Gatos, Cupertino, Morgan Hill, Gilroy, Sunnyvale, Santa Cruz, Saratoga, and Alameda, San Mateo, Santa Clara, San Benito, Mendocino, and Calaveras counties.

Hours Worked for Calculating Worker Pay

What are the “Hours Worked” for Purposes of Calculating Employee Pay?

Employers must pay employees for all “hours worked.”  But does an employer have to pay an employee when the employee is not actually rendering services on behalf of the employer?  The answer may surprise you.

Definition of Hours Worked

The Industrial Welfare Commission, the agency charged with promulgating California regulations regarding the terms and conditions of employment, typically define “hours worked” as ” the time during which an employee is subject to the control of an employer, and includes all the time the employee is suffered or permitted to work, whether or not required to do so.”  This includes any time the employee is required to be in a specific location, and any time the employee actually performs work, even if the work is not previously approved.

Wage Order 5 regarding the Public Housekeeping Industry, adds a special definition “in the case of employee required to reside on the employment premises.” For employees required to reside on the premises (such as residential care facilities and apartment managers) “hours worked” is the “time spent carrying out assigned duties.”  This special definition only applies to persons employed in the Public Housekeeping Industry, which includes “any industry, business, or establishment which provides meals, housing, or maintenance services whether operated as a primary business or when incidental to other operations in an establishment not covered by an industry order of the Commission.”

Employees working in the health care industry also have a special definition of “hours worked: “the time during which an employee is suffered or permitted to work for the employer, whether or not required to do so, as interpreted in accordance with the provisions of the Fair Labor Standards Act.”

These differing definitions lead to confusion and potentially costly mistakes.  Employees and employers need to understand which hours are counted as hours worked so that employees can be properly compensated.

Sleep Time

Recent California Supreme court decisions make it clear that, unless the employee is covered by Wage Order 5, employees that are required to remain on the premises are entitled to compensation, even if the employee spends some of that time sleeping.   There are a few exceptions, such as ambulance drivers, but for the most part employers are required to compensate employees for all hours worked.

On-Call Time

Some employers need employees to be available to answer cell phone calls and/or email messages.  Depending on several factors, the time spent waiting for the phone to ring or for the email to come may be compensable or not.  Is the employee “waiting to be engaged?” or “engaged to wait?”  State and federal law define compensable on-call or stand-by time differently.  Although technology has made it easier for employees to work away from the job site, that same technology also creates new liabilities for employers.

Meals and Rest Breaks

All employees are entitled to take regular meal and rest breaks.  Failure to provide required rest breaks to non-exempt employees can carry significant penalties.  Employers are required to maintain accurate records of the hours worked, including meal breaks taken.  Employers that do not maintain accurate records of meal breaks have a difficult time defending meal and rest break violation claims.  Courts and the Labor Commissioner continue to struggle with how much control an employer can exercise over an employee during the required breaks, and how far an employer has to go to ensure the employee is afforded the opportunity take all required breaks.

Despite the media attention given to this topic, many employers still fail to adequately relieve employees, and large and small companies routinely face litigation involving meal and rest break claims.  Employers are much more likely to violate wage and hour laws than anti-discrimination laws, and employees are much more likely to pursue wage claims.

Understanding the employer and employee rights and obligations is the first step in resolving any potential issues.  Robert Nuddleman has advised and litigated unpaid wage claims on behalf of hundreds of clients. Because he represents employees and employers, he understands the motivating factors behind the dispute, and how to avoid issues before they become problems, and how to resolve problems when they occur.