A small business owner in San Diego once said to me he has a “zero comeback” policy for his employees. Once they quit, that’s a forever choice, zero exceptions. It made me laugh because, as he put it, “You gotta bury the dead and get on with the living.”
I tend to agree. Every time I brought an old employee back, I regretted it. While I like to cultivate good employees when I get them, it would be naive to believe that they weren’t just with me for the money. Separation is inevitable.
So, here are some basics that every employer in California needs to know when that final day with an employee comes.
- You can’t wait until the next payday to pay final paychecks. If the employee quits with 72 hours or more notice, you have to pay their final paychecks on their last day. If they give you less than 72 hours’ notice, then you have that 72 hours’ period to pay from the time of notice. If you terminate them, the final paycheck is always due immediately.
- Final paychecks must include all payouts for bonuses, commissions and vacation/PTO. Don’t make the mistake of failing to pay a lump sum of all earned vacation time!
- If the final check isn’t handed to them on their last day for some reason, then you must hold their paycheck at their normal place of payment for pick up. An employer may mail the check to the employee if the employee expressly requests it (and I would recommend that this be in writing). Otherwise, hold it until they come get it.
- Do not deduct money for advanced wages or loans out of final paychecks unless that is an express agreement that you have in writing. There are permissible deductions for malfeasance, garnishments and (sometimes) equipment/company property wrongly retained by the employee. Regardless of whether it is from a final paycheck or not, always deduct with extreme care.
Final paychecks are important, because failing to handle them correctly can cause you to incur waiting time penalties. This is a phenomenon related to the final paycheck only. Waiting time penalties are ridiculous and cost the employer the employee’s wage for an eight hour day times thirty days. For example, a minimum wage employee, even if he is part time or even just on-call, will have a waiting time penalty of $8 x 8 x 30 = $1,920. This penalty only goes up in amount for higher earning employees. This penalty is assessed most of the time and its application is very rigid. Thus the penalty can be tens or even hundreds of times more money than the actual underpaid wage.
So there you have it. Basic tips for cutting that final paycheck properly in California. Follow these rules (as well as other good HR and termination practices) and hopefully ex-employees will never return from the dead to haunt you.