Question: My company may not be able to make the payroll this coming payday because of economic conditions in the housing industry. The posted payday is every other Friday for both exempt and non-exempt employees, and we have a total of 25 employees. What is the penalty for failure to pay wages on payday?
Answer: The penalties are costly, and inability to pay is not considered a defense for failure to meet the payday.
When an employer fails to pay wages as required by Labor Code section 204 on a regular payday, the employer, under Labor Code section 210, is subject to a civil penalty for each such missed payday.
The initial penalty for failure to pay wages is $100 per employee per missed payday. In your case the potential civil penalty is $2,500.
Civil penalties for subsequent missed paydays are much more severe. The penalty is $250 per employee, plus 25 percent of the amount unlawfully withheld.
Most penalties required by the Labor Code and the Industrial Welfare Commission Wage Orders go to the employees; however, payday penalties go to the State of California. These penalties may be recovered by the Labor Commissioner through a hearing process outlined in Labor Code section 98(a) or by going directly to the courts.
Frequently, when a payday is missed, terminations follow. This brings into play a whole new set of penalties for failure to pay in a timely fashion. Employees who are terminated by the employer must be paid immediately, and if not, Labor Code sections 201 and 203 provide up to 30 days waiting time penalties, which go to the employee.
Labor Code section 202 provides that an employee who gives at least 72 hours notice of quitting must be paid on his/her last day of work, and if not, Labor section 203 provides for up to 30 days waiting time penalties.
An employee who quits without giving at least 72 hours notice must wait 72 hours before returning to his/her place of employment and requesting wages.
Labor Code section 202 gives the employee the option of receiving final wages by regular mail if he/she so requests and designates a mailing address. The employer has 72 hours to mail final wages to the employee.
Labor Code section 203 provides for up to 30 days waiting time penalties if section 202 is not complied with. All Labor Code section 203 waiting time penalties go to the employee.
Courtesy California Chamber of Commerce Alert