Employers have a legal obligation to pay the wages that their employees earn. They also have an obligation to pay those wages on time. California law protects employees who experience late or unpaid wages.
This article explains what the obligations of California employers, as well as the solutions employees have when wages are not paid or are paid later than the law requires.
- 1 Definition of “Wages”
- 2 The Right to Wage Payments Generally
- 3 Form of Wage Payments
- 4 When Wages Must Be Paid
- 5 Payment of Final Wages
- 6 Vacation Pay
- 7 Waiting Time Penalty
- 8 Private Attorneys General Act (PAGA) Claims
- 9 Recovering Unpaid or Late-Paid Wages
Definition of “Wages”
All forms of compensation for work are wages, including:
- Hourly pay,
- A fixed salary,
- Piece-rate payments, and
- Payment that varies by project or task.3
The term wages also includes benefits that an employee receives as a part of his or her compensation, including money, room, board, clothing, vacation pay, and sick pay.4
The Right to Wage Payments Generally
Every person employed in California is entitled to be paid wages they have earned. In fact, the California legislature has declared it to be state policy that the right to be paid wages for work applies to all workers, regardless of their immigration status.5
An employee’s right to be paid for work has two legal sources: contract law and the California Labor Code.6
Wages as a Contract Right
When a worker accepts employment at a promised wage, the worker and the employer have entered into a binding agreement.7
The promise to pay wages for work usually takes the form of a formal written contract. But an oral agreement is also enough to create an enforceable obligation to pay earned wages.8
Wages as an Labor Right
When California law gives an employee the right to receive a minimum wage or overtime, an employment contract providing for a lesser wage is not valid or enforceable.10
Distinguish: Payments to Independent Contractors
Wages are paid to employees.11 Independent contractors receive payments for work performed pursuant to a contract, but those payments are not wages.
However, when an employee has been misclassified as an independent contractor, the employee is entitled to be paid the wages that are required by California law.12
Form of Wage Payments
Most employers pay wages by using a company check or a check issued by a payroll service from the employer’s payroll account.
Employers are permitted to pay wages by means of a personal check or in cash,13 but they are not permitted to make “under the table” payments. Whether wages are paid by cash or by check, employers are required by state and federal law to withhold payroll taxes.14
All employees must be given a wage statement with each wage payment, regardless of whether the wages are paid by check or cash.15 The wage statement must show:
- Gross and net wages paid,
- The number of hours worked during the pay period,
- The number of pieces for which the employee is being paid (if the employee is paid a piece rate), and
- Any deductions made from gross pay (like payroll taxes).16
Having the right to inspect the employer’s records helps employees make a claim for unpaid wages.
When Wages Must Be Paid
The agreement between the employee and employer sets the terms of employment, including when wages will be paid. But California law imposes some requirements on employers, regardless of their agreement with their employees.
General Rule: Semimonthly Payments
The employer must post a conspicuous notice at the place of work or at the office where employees are paid, specifying the regular paydays and the time and place of payment.21
If employees are paid semimonthly (twice a month) and the work periods for which they are paid are the 1st through the 15th and the 16th through the end of the month, wages must be paid on the following schedule:22
- Wages earned between the 1st and 15th day of the month must be paid between the 16th and 26th day of the same month.
- Wages earned between the 16th and the last day of the month must be paid between the 1st and the 10th day of the following month.
Alternative Pay Schedules
If employees are paid on any other schedule the employer must generally pay wages no later than 7 days after the end of each work period.23
This rule applies to employees paid on a weekly or biweekly (every two weeks) basis, as well as those who are paid semimonthly with work periods other than the 1st through the 15th and the 16th through the end of the month.24
Wages for overtime earned during a work period must be paid not later than the regular payday for the next work period.25
Certain employees are exempt from many of California’s labor laws. They are usually employees who work in administrative, executive, or professional positions.26 Exempt employees are paid on a different schedule than other employees.
They may be paid once a month, provided that the payment is made on or before the 26th of the month and includes wages for the entire month—including wages between the date of the payment and the end of the month that the employee has not yet earned.27
Employees who are unsure if they are an exempt employee can consult our article How to Tell If an Employee Is “Exempt” under California Law.
Vehicle Sales Commission Payments
Commissions paid by a licensed vehicle dealer may be paid once each month on a date designated as a salesperson’s payday.28
Agricultural employees who are not provided room and board and who are paid on the semimonthly schedule discussed above must be paid no later than the 22nd of the same month for work performed between the 1st and 15th, and no later than the 7th of the next month for work performed between the 16th and the last day of the month.29
Certain employees, including household domestic employees, who receive room and board as part of their compensation may be paid once each month on a date designated in advance. Wages paid on that payday must cover the payday and all days worked after the prior payday (which cannot be more than 31 days before the current payday).30
Depending on the employees type of work and employment agreement, there may be other exceptions to these schedules. Employees should consult an employment lawyer if they need advice about when their wages are due.
Payment of Final Wages
The greatest risk of not being paid comes when an employee is discharged. The timing of an employee’s final paycheck depends on whether they are fired or they quit.
In general, an employee who is fired must be paid all unpaid wages that have been earned up to and including the date of termination. That payment must be made on the same day that the employee is terminated.31
There are, however, limited exceptions to this rule, depending on the industry in which the worker is employed.32
Employees who quit and give notice at least 72 hours before their last day of work must be paid their final wages on their last day, assuming it is the day stated in the notice.33
Employees who quit without giving such notice must be paid their final wages within 72 hours after their last day of work.34
Employers are not required to offer vacation pay to their employees,37 but they must follow certain rules if they do.
If an employment agreement includes paid vacations, an employee is entitled to be paid wages for unused vacation time that has vested at the time the employee’s work ends.38 The right to a paid vacation vests as the employee performs the work that entitles the employee to a paid vacation.39
When employment is terminated, the employee is entitled to be paid for the portion of the employee’s unused paid vacation that the employee has earned.40
An employment agreement gives the employee the right to take two weeks of paid vacation after one year of work. If the employee is terminated after six months of work, the employee has earned half of the paid vacation. The employee is entitled to one week of extra wages at the time of termination.
California employers are not allowed to circumvent the right to be paid the proportionate share of vacation pay that the employee has earned by conditioning entitlement to vacation on the completion of a fixed period of work.41
So, even if an employment agreement states that the employee is not entitled to vacation pay until the employee has worked a full year, the employee must be paid for unused paid vacation in proportion to the time that the employee worked before employment ended.42
Waiting Time Penalty
California law provides for a “waiting time penalty” when employers willfully fail to pay final wages, in full and on time, after employment ends.43
Calculating the Penalty
The waiting time penalty consists of a full day of wages for each day that payment is delayed.46 The penalty continues to accrue for as much as 30 days after discharge, depending on when payment is fully satisfied.47
The waiting time penalty is calculated by computing the employee’s daily wage rate and then multiplying it by the number of days that payment is delayed, up to a maximum of 30 days.48
The daily wage rate is typically calculated by adding base wages, commissions, bonuses, and vacation pay that the employee earns in a year, dividing that sum by 52 weeks, and dividing that result by 40 hours.49
When a Failure to Pay is “Willful”
A failure to pay wages on time is willful if the failure is intentional.50 An employer does not fail to pay wages willfully when there is a good faith dispute about the employee’s entitlement to the unpaid wages.51
A good faith dispute exists when an employer presents a legitimate legal or factual defense to the payment of wages, even if the employer does not prevail.52
Employer’s Insufficient Funds
The waiting time penalty applies if the employer intentionally pays final wages with a check that cannot be cashed or deposited because it is not supported by sufficient funds or because it is drawn on a bank where the employer no longer has an account.
When the paycheck bounces or is rejected in this way, a penalty of one day of additional wages for each day that the check is not satisfied continues for a maximum of 30 days.
Private Attorneys General Act (PAGA) Claims
In some cases, the employer fails to pay wages in full or on-time and the employee continues work for the employer. In these situations, the waiting time penalty doesn’t apply.53 Instead, the employer may be liable for statutory fines.
If an employer fails to pay their employees’ wages as required by law, they are subject to a civil penalty in the following amounts:
- First Violation. For any initial violation, the employer must pay $100 for each failure to pay each employee.54
- Subsequent Violations. For each subsequent violation, or any willful or intentional violation, the employer must pay $200 for each failure to pay each employee, plus 25% of the amount unlawfully withheld.55
In general, these penalties are payable to the State of California.56 However, an employee can sometimes recover up to 25% of the penalty by bringing a lawsuit under the Private Attorneys General Act.57 These are called “PAGA” claims.
A employee may bring a PAGA claim by filing a civil lawsuit against their employer.58 To do this, however, the employee must first follow certain procedures, which are described in Labor Code sections 2698 through 2699.5.
If the employee wins, the court may award them 25% of the penalty due under the statute, plus reasonable attorney fees and litigation costs.59 Many attorneys take these kinds of cases on a contingency basis, without any upfront fees.
Recovering Unpaid or Late-Paid Wages
Unpaid wages and penalties for late-paid wages can be pursued in three primary ways:
- By resolving the dispute informally with the employer,
- By filing a lawsuit in court, or
- By bringing an administrative claim for unpaid wages and penalties.60
The procedure for filing an administrative wage claim is explained in our article How to File a Wage & Hour Claim in California. The pros and cons of wage claims and civil lawsuits are also discussed in that article.
Of course, the best way to resolve a wage dispute will depend on the employee’s specific situation. It’s usually a good idea to get the opinion of a lawyer before deciding how to proceed.
If you think you haven’t received your full wages, protect yourself and call the work lawyers of Smith & Lo at (310) 340-7677 to learn more about your legal options.
Labor Code, § 200, subd. (a) [“‘Wages’ includes all amounts for labor performed by employees of every description, whether the amount is fixed or ascertained by the standard of time, task, piece, commission basis, or other method of calculation.”].Footnote 1
Labor Code, § 200, subd. (b) [“‘Labor’ includes labor, work, or service whether rendered or performed under contract, subcontract, partnership, station plan, or other agreement if the labor to be paid for is performed personally by the person demanding payment.”].Footnote 2
Labor Code, § 200, subd. (a).Footnote 3
Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1103 [“Courts have recognized that ‘wages’ also include those benefits to which an employee is entitled as a part of his or her compensation, including money, room, board, clothing, vacation pay, and sick pay.”].Footnote 4
Labor Code, § 1171.5, subd. (a) [“All protections, rights, and remedies available under state law, except any reinstatement remedy prohibited by federal law, are available to all individuals regardless of immigration status who have applied for employment, or who are or who have been employed, in this state.”].Footnote 5
Reynolds v. Bement (2005) 36 Cal.4th 1075, 1084 [“An employee’s wage rights may be provided for in an employment contract and also are closely regulated by statute.”], abrogated on other grounds by Martinez v. Combs (2010) 49 Cal.4th 35.Footnote 6
Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 696 [“the employment relationship is fundamentally contractual”].Footnote 7
Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 675 [the fact that employment contract is “an implied or oral agreement is not fatal to its enforcement”].Footnote 8
Cuadra v. Millan (1998) 17 Cal.4th 855, 858 [“The Labor Code prescribes such matters as the time and manner of paying wages, minimum wage requirements, and mandatory overtime pay . . . .”] disapproved on other grounds by Samuels v. Mix (1999) 22 Cal.4th 1.Footnote 9
Labor Code, § 1194, subd. (a) [“Notwithstanding any agreement to work for a lesser wage, any employee receiving less than the legal minimum wage or the legal overtime compensation applicable to the employee is entitled to recover in a civil action the unpaid balance of the full amount of this minimum wage or overtime compensation, including interest thereon, reasonable attorney’s fees, and costs of suit.”].Footnote 10
Labor Code, § 200, subd. (a) [“‘Wages’ includes all amounts for labor performed by employees . . . .”].Footnote 11
S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341, 349 [“The label placed by the parties on their relationship is not dispositive, and subterfuges are not countenanced.”].Footnote 12
Other types of compensation—such as stock options and profit sharing—are beyond the scope of this article. Employees should consult an employment lawyer if they need advice about any form of unpaid compensation.Footnote 13
Labor Code, § 224 [authorizing payroll tax deductions from wages].Footnote 14
Labor Code, § 226, subd. (a).Footnote 15
Labor Code, § 226, subd. (a) [“An employer, semimonthly or at the time of each payment of wages, shall furnish to his or her employee, either as a detachable part of the check, draft, or voucher paying the employee’s wages, or separately if wages are paid by personal check or cash, an accurate itemized statement in writing showing (1) gross wages earned, (2) total hours worked by the employee, except as provided in subdivision (j), (3) the number of piece-rate units earned and any applicable piece rate if the employee is paid on a piece-rate basis, (4) all deductions, provided that all deductions made on written orders of the employee may be aggregated and shown as one item, (5) net wages earned, (6) the inclusive dates of the period for which the employee is paid, (7) the name of the employee and only the last four digits of his or her social security number or an employee identification number other than a social security number, (8) the name and address of the legal entity that is the employer and, if the employer is a farm labor contractor, as defined in subdivision (b) of Section 1682, the name and address of the legal entity that secured the services of the employer, and (9) all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee and, beginning July 1, 2013, if the employer is a temporary services employer as defined in Section 201.3, the rate of pay and the total hours worked for each temporary services assignment.”].Footnote 16
Labor Code, § 226, subd. (a) [“[A] copy of the statement and the record of the deductions shall be kept on file by the employer for at least three years at the place of employment or at a central location within the State of California. For purposes of this subdivision, ‘copy’ includes a duplicate of the itemized statement provided to an employee or a computer-generated record that accurately shows all of the information required by this subdivision.”].Footnote 17
Labor Code, § 226, subd. (b) [“An employer that is required by this code or any regulation adopted pursuant to this code to keep the information required by subdivision (a) shall afford current and former employees the right to inspect or copy records pertaining to their employment, upon reasonable request to the employer. The employer may take reasonable steps to ensure the identity of a current or former employee. If the employer provides copies of the records, the actual cost of reproduction may be charged to the current or former employee.”].Footnote 18
Labor Code, 204, subd. (a).Footnote 19
Labor Code, 204, subd. (a) [“All wages, other than those mentioned in Section 201, 201.3, 202, 204.1, or 204.2, earned by any person in any employment are due and payable twice during each calendar month, on days designated in advance by the employer as the regular paydays.”].Footnote 20
Labor Code, § 207 [“Every employer shall keep posted conspicuously at the place of work, if practicable, or otherwise where it can be seen as employees come or go to their places of work, or at the office or nearest agency for payment kept by the employer, a notice specifying the regular pay days and the time and place of payment, in accordance with this article.”].Footnote 21
Labor Code, 204, subd. (a)Footnote 22
Labor Code, § 204, subd. (d) [“The requirements of this section shall be deemed satisfied by the payment of wages for weekly, biweekly, or semimonthly payroll if the wages are paid not more than seven calendar days following the close of the payroll period.”]. Weekly pay is governed by Labor Code section 204b.Footnote 23
Labor Code, §§ 204, subd. (d), 204b.Footnote 24
Labor Code, § 204, subd. (b).Footnote 25
Labor Code, § 515, subd. (a); Cal. Code of Regs., tit. 8, § 11040Footnote 26
Labor Code, § 204, subd. (a).Footnote 27
Labor Code, § 204.1.Footnote 28
Labor Code, § 205.5.Footnote 29
Labor Code, 205 [applying to employees in “agricultural, viticultural, and horticultural pursuits, in stock or poultry raising, and in household domestic service, when the employees in such employments are boarded and lodged by the employer”].Footnote 30
Labor Code, § 201, subd. (a) [“If an employer discharges an employee, the wages earned and unpaid at the time of discharge are due and payable immediately.”].Footnote 31
Employers may delay payment for up to 72 hours when they lay off a group of seasonal employees involved in “the curing, canning, or drying of any variety of perishable fruit, fish or vegetables.” (Labor Code, § 201, subd. (a).) Other rules apply to terminations in specified industries, including certain employees in the movie industry (Labor Code, § 201.5), employees who drill oil (Labor Code, § 201.7), and certain employees who work in venues that host live theatrical or concert events (Labor Code, § 201.9).Footnote 32
Labor Code, § 202, subd. (a) [“If an employee not having a written contract for a definite period quits his or her employment, his or her wages shall become due and payable not later than 72 hours thereafter, unless the employee has given 72 hours previous notice of his or her intention to quit, in which case the employee is entitled to his or her wages at the time of quitting.”].Footnote 33
Labor Code, § 202, subd. (a).Footnote 34
Suastez v. Plastic Dress-Up Co. (1982) 31 Cal.3d 774, 779 [“It is established that vacation pay is not a gratuity or a gift, but is, in effect, additional wages for services performed.”].Footnote 35
Suastez v. Plastic Dress-Up Co. (1982) 31 Cal.3d 774, 780 [“[V]acation pay is simply a form of deferred compensation.”].Footnote 36
Henry v. Amrol, Inc. (1990) 222 Cal.App.3d Supp. 1, 5 [the law “does not require that an employer include a paid vacation as a portion of his employees’ compensation”].Footnote 37
Labor Code § 227.3.Footnote 38
Suastez v. Plastic Dress-Up Co. (1982) 31 Cal.3d 774, 784 [“Case law from this state and others, as well as principles of equity and justice, compel the conclusion that a proportionate right to a paid vacation ‘vests’ as the labor is rendered. Once vested, the right is protected from forfeiture by section 227.3.”]Footnote 39
Suastez v. Plastic Dress-Up Co. (1982) 31 Cal.3d 774, 784 [“On termination of employment, therefore, the statute requires that an employee be paid in wages for a pro rata share of his vacation pay.”].Footnote 40
Labor Code, § 227.2 [“[A]n employment contract or employer policy shall not provide for forfeiture of vested vacation time upon termination.”].Footnote 41
Labor Code, § 203.Footnote 42
Labor Code, § 203, subd. (a); see McLean v. State of California (2016) 1 Cal.5th 615, 619 [“An ’employer’ that ‘willfully fails to pay’ in accordance with sections 201 and 202 ‘any wages of an employee who is discharged or who quits’ is subject to so-called waiting-time penalties of up to 30 days’ wages.”].Footnote 43
Mamika v. Barca (1998) 68 Cal.App.4th 487, 491–492.Footnote 44
Mamika v. Barca (1998) 68 Cal.App.4th 487, 493 [“This larger penalty acts as a disincentive to employers who are reluctant to pay wages in a timely manner, thus furthering the intent of the statutory scheme.”].Footnote 45
Labor Code, § 203, subd. (a) [“If an employer willfully fails to pay, without abatement or reduction, in accordance with Sections 201, 201.3, 201.5, 201.9, 202, and 205.5, any wages of an employee who is discharged or who quits, the wages of the employee shall continue as a penalty from the due date thereof at the same rate until paid or until an action therefor is commenced; but the wages shall not continue for more than 30 days. An employee who secretes or absents himself or herself to avoid payment to him or her, or who refuses to receive the payment when fully tendered to him or her, including any penalty then accrued under this section, is not entitled to any benefit under this section for the time during which he or she so avoids payment.”].Footnote 46
Labor Code, § 203.Footnote 47
Mamika v. Barca (1998) 68 Cal.App.4th 487, 493 [“[T]he critical computation required by section 203 is the calculation of a daily wage rate, which can then be multiplied by the number of days of nonpayment, up to 30 days.”].Footnote 48
Drumm v. Morningstar, Inc. (N.D. Cal. 2010) 695 F.Supp.2d 1014, 1019 [approving jury instruction specifying this manner of calculation].Footnote 49
Cal. Code of Regs., tit. 8, § 13520 [“A willful failure to pay wages within the meaning of Labor Code Section 203 occurs when an employer intentionally fails to pay wages to an employee when those wages are due.”].Footnote 50
Cal. Code of Regs., tit. 8, § 13520 [“[A] good faith dispute that any wages are due will preclude imposition of waiting time penalties under Section 203.”].Footnote 51
Cal. Code of Regs., tit. 8, § 13520, subd. (a) [“A ‘good faith dispute’ that any wages are due occurs when an employer presents a defense, based in law or fact which, if successful, would preclude any recover on the part of the employee. The fact that a defense is ultimately unsuccessful will not preclude a finding that a good faith dispute did exist. Defenses presented which, under all the circumstances, are unsupported by any evidence, are unreasonable, or are presented in bad faith, will preclude a finding of a ‘good faith dispute.'”].Footnote 52
See Labor Code, § 203 [applying only to aFootnote 53
Labor Code, §§ 210, subd. (a)(1), 225, subd. (a).Footnote 54
Labor Code, §§ 210, subd. (a)(2), 225, subd. (b).Footnote 55
Labor Code, §§ 210, 225.Footnote 56
Labor Code, §§ 2698–2699.5.Footnote 57
Labor Code, § 2699, subd. (a).Footnote 58
Labor Code, § 2699, subds. (g), (i).Footnote 59
Post v. Palo/Haklar & Associates (2000) 23 Cal.4th 942, 946 [“[I]f an employer fails to pay wages in the amount, time, or manner required by contract or statute, the employee may seek administrative relief by filing a wage claim with the commissioner or, in the alternative, may seek judicial relief by filing an ordinary civil action for breach of contract and/or for the wages prescribed by statute.”].Footnote 60