As an employer, what are you supposed to do if an employee won't accept their final paycheck? While this situation may seem unlikely, occasionally I get asked this very question. The answer may surprise you.
You likely already know that you must pay a terminated employee all wages and benefits owed at the time of their termination. Some employers mistakenly believe that they can wait until the next regular paycheck day to pay final wages -- this is a big mistake and will result in penalties from the Labor Board.
If an employee quits and gives you at least 72 hours notice, you must pay all final wages and benefits owed on the employees last day of work.
If an employee quits and gives you less than 72 hours notice, you must pay the employee within 72 hours of their notice. You can pay the employee in person within that timeframe or mail the payment to the employee if they request that you do so.
Keep this in mind: when an employee is terminated or voluntarily quits, you should pay the employee with a live paper check. The Labor Commissioner states that authorization for direct deposit is terminated immediately upon termination or voluntary separation. The check should itemize what wages and benefits are being paid and should contain the appropriate tax withholdings.
So far we haven't covered anything unusual. But what if your employee fails to accept their final wages? Maybe they don't return to your office to pickup their final paycheck, or maybe there is a dispute over what is owed and they won't accept that which you have paid.
If this happens to you, you should make every effort to contact your employee about their unclaimed paycheck. You should also carefully document your efforts. If all else fails, California law directs you to mail the unclaimed wages along with an explanation to the nearest Labor Commissioner office.
Tendering the unpaid wages to the Labor Commissioner will help you in the event that the employee later files a labor complaint against you for the failure to pay final wages. The documentation of your efforts to contact the employee along with the delivery of wages to the Labor Commissioner will help establish your good-faith effort to pay the employee and will help you to avoid up to 30 days "waiting time" penalties for failure to pay wages.
If you have questions regarding final pay for a terminated or separated employee, please contact my office at (916) 333-2222.