FINAL PAY 2026 – A Reminder of California’s Unique Rules

This is a reminder of the “unique” rules regarding California’s final pay rules — an area that often causes confusion for employers and can lead to costly penalties for employers.

Under California law, WHEN the final pay is due to an employee depends on the circumstances regarding the termination:

• For Involuntary Terminations: Employees who are terminated must receive their final paycheck on the same day of termination, usually at the termination meeting. This includes all wages earned through the last day of work, and must include accrued and unused vacation time. And, it means a paper check.
• For Voluntary Resignations: If an employee provides you with at least 72 hours’ notice, their final wages are due at the end of their last working day. If less advance notice is given to an employer by the employee, the employer has up to 72 hours from when they received notice of the resignation to prepare the final pay.

Direct Deposit of Final Pay – NOT AUTOMATIC

While it may seem logical that if an employee had already consented to direct deposit, their final pay can/should automatically be via direct deposit, the California Division of Labor Standards (DSLE) takes the stance that any direct deposit authorization given by the employee is immediately terminated when the employee is terminated or resigns. However, if the employee wants their final pay to be via deposit, get that in writing. Otherwise, a paper check must be issued.

Penalties for Late Payment of Final Pay

If your employee does not receive their final pay by the due date, automatic waiting time penalties apply, which can be very costly, so MAKE SURE you properly calculate your employee’s final pay. The automatic waiting time penalty for final wages is one day’s wages for every day the employee has to wait. So, if an employee tells you on Monday that Friday will be their last day, they must receive their final pay on that Friday. If you wait until the following Monday to pay them, they are due all their final wages PLUS THREE DAYS WAGES as the waiting time penalty. Weekends count towards the 30 days.

It’s crucial for employers to understand these rules to avoid disputes and avoid risky penalties. There is no way to anticipate every situation that may arise, but if you have specific questions regarding your situation or have questions about other employment laws, feel free to reach out to Artiano & Associates, one of South Bay’s most trusted law firms for businesses and employers.