Waiting Time Penalties: A Refresher To Stop The Developing Trend

Thursday, 12 March 2009 09:11

Wage & Hour

Waiting time penalties are assessed for all unpaid compensation such as wages and accrued paid vacation.  The penalty is calculated by multiplying the employee’s daily wage by the number of days that the employee waited for payment, up to a maximum of 30 days. 

Examples of Waiting Time Penalties

• Employee makes $10/hour, works 8 hours a day and 40 hours a week.  On Monday Employee works an hour of overtime.  Company fires Employee on Friday because Company found that Employee stole trade secrets on Tuesday.  Company provides Employee his final paycheck on the spot, but does not pay Employee for his Monday overtime.  Employee waits 30 days then brings an action for the $15 of overtime and waiting time penalties. Employee is entitled to his unpaid overtime and a waiting time penalty in the amount of $2,400 ($10/hr multiplied by 8 hours a day, multiplied by 30 days). 

• On Monday Employee tells Company that Friday will be his last day as he is quitting.  On Friday, Employee asks Company for his check.  Company says Employee will have to wait until payroll is done.  Company says it will just mail the check.  Employee receives the check in the mail fifteen days after he quit.  The envelope was postmarked three days prior to that date.  Employee is entitled to a waiting time penalty in the amount of 15 days’ wages.

When Should I pay? 

Obviously the timing of final paychecks is important.  The time for a final paycheck depends on whether an employee quit without notice, quit with at least 72 hours notice, or was terminated or laid off. 

• Termination or Layoff:  If you terminate an employee, all wages and accrued vacation earned, but unpaid, must be paid immediately.  This means the employee must be paid at the time of discharge regardless of the length of employment, or the reason for termination.  
• Employers cannot withhold a final paycheck to induce a former employee to return property, or money or turn in expense forms.   
• Some employers suspend employees before termination so they have time to prepare a final paycheck.  However, an   employee who can show his/her suspension was merely a way to extend the time of final payment of wages, rather than a legitimate investigation, can recover waiting time penalties. 

• Voluntary Quit With More Than 72 Hours Notice:  If an employee gives more than 72 hours final notice, you must pay him on his last day of work. 
• Voluntary Quit With Fewer Than 72 Hours Notice: All wages and accrued vacation earned but unpaid for an employee who quits with fewer than 72 hours of notice must be paid within 72 hours after notice is given.

Where Should I Pay? 

• Termination:  Terminated employees should be paid at the job site. 
• Voluntary Quit, More than 72 Hours:  Normally quitting employees must return to the office of the employer in the county where work was performed. 
• Voluntary Quit, Less than 72 Hours:  Employers are not obligated to mail a paycheck unless an employee who quits with fewer than 72 hours notice requests payment by mail and provides a mailing address. 

• Mailing:  Employers are ordinarily not obligated to mail or otherwise deliver a paycheck.  Unless the employee specifically requests payment by mail, employers may simply hold the employee’s final paycheck until it is picked up. Be aware that mailing the final paycheck without a request to do so could subject the employer to waiting time penalties, since the employee could show up to pick up the check after it has been mailed but before it is delivered to him/her.

What about Expense Reimbursements? 

The payment deadlines for final wages do not apply to reimbursement of expenses the employee may have incurred on your behalf. Those reimbursements may be made at the normal time for payment.

What about Severance Pay? 

Severance pay is not required by law and will generally not be considered as wages.  Employers should be cautious when giving severance pay since paying one employee, but not another could invite claims that the subsequent denial was discriminatory. 

How about Commissions? 

Commissions are considered wages and thus are subject to the normal rules regarding timing of wage payments. However, commissions present special issues regarding the timing of final wages.  The Labor Commissioner recognizes that it is impossible to calculate commissions on customer payments not yet received, and exempts these wages from the normal final wage payment deadlines.

COUNSEL TO MANAGEMENT:

These waiting time penalty cases seem to be on the rise.  Plaintiffs are obviously talking about the “free money” they can get, just by not saying anything.  Management cannot rely on the defense that they did not intend to withhold the money, or that they did not know when they had to pay, or that the Employee did not ask for their money. 

Management must ensure it is making timely and accurate payments of wages and final wages or else it subjects itself to waiting time penalties.  As shown above, failing to $15 in overtime can subject Management to $2,400 in waiting time penalties.  Therefore, it is important that Management maintain accurate records of hours and wages and accurate records of payments made or else Management could end up waiting for a hearing in the Labor Commissioner’s office.

The goal of this article is to provide employers with current labor and employment law information. The contents should not be interpreted or construed as legal advice or opinion. For individual responses to questions or concerns regarding any given situation, the reader should consult with The Saqui Law Group at (831) 443-7100 in Salinas.