Final Paycheck FAQ

California Labor Code Section 201 requires employers to pay all wages due to a terminated employee immediately at the time of discharge. This means if you are fired, laid off, or otherwise involuntarily terminated, your employer must provide your final paycheck at the moment of termination, not at the next regular payday.

The final paycheck must include all earned wages, including regular hourly pay or salary, any overtime owed, accrued but unused vacation time, commissions that have been earned (though some commission arrangements may allow later payment for unearned portions), bonuses that have vested, and any other compensation owed.

If the employer fails to pay immediately upon termination, waiting time penalties begin to accrue under Labor Code Section 203 at the employee's daily rate of pay for each day wages remain unpaid, up to a maximum of 30 calendar days. The only exception is when there is a dispute about the amount owed, in which case the employer must pay the undisputed portion immediately and resolve the disputed portion promptly. Employers cannot delay payment because they need to calculate complex pay arrangements or because the employee must return company property first.

When an employee voluntarily resigns, the deadline for final payment depends on whether advance notice was provided. Under California Labor Code Section 202, if an employee quits without giving at least 72 hours advance notice, the employer has 72 hours from the time of resignation to provide the final paycheck.

However, if the employee provides at least 72 hours notice of intent to quit, the employer must pay all wages due at the time of quitting, meaning on the employee's last day of work. The final paycheck must include all wages earned through the last day worked, accrued vacation pay, and any other compensation owed.

For example, if you submit your two-week notice on Monday and your last day is the Friday two weeks later, your employer must give you your complete final paycheck on that Friday. If you quit effective immediately without prior notice, the employer has until 72 hours later (not 72 business hours, but 72 actual hours) to pay you. The payment must be made at the employer's office or another location specified in the Labor Code, and the employer can mail the check if the employee requests. Violation of these deadlines triggers the same waiting time penalties as late payment after termination.

Waiting time penalties are a powerful remedy under California Labor Code Section 203 for employees whose employers willfully fail to pay final wages on time. When an employer does not pay all wages due at termination or within the required timeframe after resignation, the employee's wages continue at the same daily rate as if the employment continued. This penalty accrues for each day payment is late, up to a maximum of 30 calendar days.

To calculate the daily wage rate, divide the employee's weekly wages by the number of days worked per week. For example, if an employee earning $20 per hour works 40 hours per week over five days, the daily rate is $160. If the employer is 30 or more days late, the employee could recover $4,800 in waiting time penalties on top of the unpaid wages themselves.

The word willfully in the statute does not require malicious intent; rather, it means the employer intentionally failed to pay, whether out of negligence or deliberate choice. Employers cannot escape penalties by claiming ignorance of the law or difficulty in calculating the amount owed. However, if there is a good faith dispute about whether wages are owed, and the employer pays the undisputed amount immediately, penalties may not apply to the disputed portion. Courts examine whether the employer's actions were reasonable and in good faith.

Yes, California law treats vacation time as earned wages that must be paid out upon separation from employment regardless of whether you quit or are terminated. Under Labor Code Section 227.3, whenever an employment relationship ends, all vested vacation time must be paid at the employee's final rate of pay as part of the final paycheck.

Unlike some states, California prohibits use-it-or-lose-it vacation policies that forfeit unused time. Once vacation is earned, it belongs to the employee and cannot be taken away. Employers may place reasonable caps on vacation accrual to prevent unlimited accumulation, but they cannot require forfeiture of already-earned time.

The vacation payout must be calculated at the employee's final rate of pay, not the rate at which the vacation was earned. For example, if you earned vacation while making $18 per hour but received a raise to $22 per hour, your vacation payout is at $22 per hour. Paid time off (PTO) that can be used for vacation is treated the same as vacation for payout purposes. However, sick leave under California's paid sick leave law is not required to be paid out at termination unless the employer's policy or an agreement provides otherwise. Failure to include earned vacation in the final paycheck triggers waiting time penalties.

When an employer fails to pay final wages properly, California law allows employees to recover significantly more than just the unpaid wages. First, you can recover all unpaid wages including regular pay, overtime, commissions, vacation payout, and any other earned compensation. Waiting time penalties under Labor Code Section 203 can add up to 30 days of wages at your daily rate, which can be substantial.

For an employee earning $25 per hour working eight hours a day, that could mean up to $6,000 in penalties alone. You can also recover interest on unpaid wages at 10% per year from the date they were due. If you prevail in a lawsuit for unpaid wages, you are entitled to reasonable attorney's fees and costs under Labor Code Section 218.5.

If wage statements were inaccurate or not provided, additional penalties of $50 per employee for the initial violation and $100 per subsequent violation, up to $4,000 total, may apply under Labor Code Section 226. PAGA claims can add civil penalties. In egregious cases, punitive damages may be available. The combination of these remedies often results in total recovery many times greater than the original unpaid wages, making it worthwhile to pursue even modest underpayments. Employment attorneys often take these cases on contingency because the fee-shifting provisions ensure payment.

No, California employers cannot legally withhold your final paycheck as leverage to compel return of company property. The obligation to pay final wages is independent of any obligation you may have to return company equipment, uniforms, keys, laptops, or other property. Labor Code Sections 201 and 202 require final wages to be paid at the time of termination or within 72 hours of resignation, with no exceptions for unreturned property.

If you fail to return company property, the employer may have other legal remedies such as deducting the value from wages if you provided written authorization for such deductions, pursuing civil claims for conversion or breach of contract, or deducting from a security deposit if one was lawfully collected.

However, employers cannot make deductions from final wages for lost or damaged property without prior written authorization, and any such deduction cannot reduce wages below minimum wage. If your employer refuses to pay final wages until property is returned, they are violating the Labor Code and you are entitled to waiting time penalties. Document any communications where the employer conditions payment on returning property, as this evidence supports your claim. File a wage claim with the Labor Commissioner or consult an employment attorney if you encounter this situation.

California law strictly limits an employer's ability to make deductions from employee paychecks, including final paychecks. Under Labor Code Sections 221 through 224, employers cannot make deductions from wages to recover money they claim is owed unless specific conditions are met.

Permitted deductions include those required by law (taxes, garnishments), deductions expressly authorized in writing by the employee for the employee's benefit (insurance premiums, retirement contributions), and deductions authorized by a collective bargaining agreement. Employers cannot deduct for cash register shortages, customer theft, breakage, business losses, equipment damage, or uniforms required by the employer, even if you signed an authorization.

Such deductions are unlawful even from final paychecks. If the employer believes you owe money, for example, for an advance you never repaid or overpaid wages, their remedy is to seek repayment separately through collection efforts or civil suit, not to unilaterally deduct from your final wages. If your employer has made unauthorized deductions from your final paycheck, you can file a wage claim for the improperly deducted amounts plus waiting time penalties if the reduced final pay was not timely provided. Any deduction that brings your wages below minimum wage is automatically illegal.

If your employer failed to pay your final wages properly, you have several options for pursuing recovery. The most common approach is to file a wage claim with the California Labor Commissioner (Division of Labor Standards Enforcement or DLSE). You can file online, by mail, or in person at any DLSE office. The claim form asks for your employment details, the nature of the violation, amounts owed, and any supporting documentation. There is no filing fee, and you do not need an attorney.

After filing, the DLSE reviews your claim and typically schedules a settlement conference where you and your employer attempt to resolve the matter with a Deputy Labor Commissioner. If settlement fails, a formal hearing is held where evidence is presented and a hearing officer issues a decision.

Alternatively, you can file a civil lawsuit in small claims court for amounts up to $12,500 (or $6,250 if you are a business entity), or in regular civil court for larger amounts. Civil court allows for jury trials and may be preferable for complex cases or those involving multiple violations. Employment attorneys often handle wage cases on contingency, taking no payment unless you win. The statute of limitations is three years for most wage claims, so act promptly to preserve your rights.

When an employer goes out of business or files for bankruptcy, recovering unpaid final wages becomes more complicated but is not necessarily impossible. If the employer simply closes operations, you should still file a wage claim with the Labor Commissioner, as the business or its owners may have assets that can be reached. Individual owners, officers, or managers may be personally liable for wage violations under Labor Code Section 558.1 if they were responsible for the violation.

In bankruptcy cases, wage claims receive priority treatment under federal bankruptcy law. Employees with unpaid wage claims filed within 180 days before bankruptcy filing are entitled to priority payment up to certain limits (currently $15,150 per employee for wages and benefits). This means employee wage claims are paid before most general creditors. You must file a proof of claim in the bankruptcy proceeding to be included in distributions.

If your employer had a wage bond posted with the Labor Commissioner, as required for certain industries like farm labor contractors, garment manufacturers, and car washes, you may be able to recover from that bond. Additionally, some professional employer organizations or staffing agencies may bear responsibility if they were joint employers. Consult with an employment attorney or the Labor Commissioner's office about your specific situation when an employer has ceased operations.

Yes, commissions and bonuses that have been earned must be included in final pay, though the timing of payment depends on when they were earned and the terms of the compensation arrangement. Under California Labor Code Section 204.1, commissions must be paid at least twice per calendar month on designated paydays. For terminating employees, any commissions that have been earned by the time of separation must be included in the final paycheck.

However, if the commission plan specifies that commissions are not earned until certain conditions are met (such as customer payment or completion of a contract period), those unearned commissions may not be due immediately. Employers must clearly define when commissions are deemed earned in a written commission agreement as required by Labor Code Section 2751.

Bonuses require similar analysis. Discretionary bonuses that the employer may choose whether to award are not automatically owed. However, non-discretionary bonuses based on meeting performance targets, length of service, or other objective criteria are earned wages that must be paid when the conditions are satisfied. Retention bonuses requiring continued employment through a future date may not be owed if you leave before that date. When commission or bonus calculations are complex, employers must complete the calculation as soon as reasonably possible and pay any amounts owed promptly, with failure to do so potentially triggering waiting time penalties.