LATE FINAL PAYCHECKS MAY SUBJECT EMPLOYER TO PENALTY
Former employees of Chipotle restaurant have sued the company claiming that it did not pay them their final wages in a timely manner after they were terminated for failing to provide documents proving they are eligible to work in the U.S. These terminations came in the wake of a review by Immigration and Customs Enforcement (I.C.E.).
While individual state laws do differ, in certain states such as California, there are specific laws governing when employers must pay employees for their final wages. An employer’s failure to comply with these labor laws can be costly.
For example, California Labor Code Section 203 provides for a penalty against the employer when there is a “willful failure to pay wages due the employee at conclusion of the employment relationship”. The penalty is based upon an employee’s daily rate of pay and is calculated by multiplying the worker’s daily wage by the number of days that the employee was not paid his/her final pay, up to a maximum of 30 days. While all compensation must be considered in determining if all wages due were paid timely as required by labor laws, expenses are not included, and overtime pay is counted only if the overtime is regularly scheduled each week.
Liability for what is known as “the waiting time penalty” does not require that the employer intended the action or any particular bad/ill motive, but rather that the employer knows what it is doing, that the action occurred and is within the employer’s control, and that the employer fails to perform a required act. The penalty can apply where there is an employer-employee relationship and a quit or a discharge, which includes a layoff.
In its defense against a waiting time penalty claim, an employer may assert that a “good faith dispute” exists as to whether the employee is owed any wages. If the employer can prove this good faith defense, the penalty will not be assessed against it.
An example of how the California Waiting Time Penalty is Calculated:
A restaurant cashier voluntarily quit her job without giving notice to her employer. She regularly worked 45 hours per week, Monday through Friday, and was making $10.00 per hour. She is given her final paycheck for all wages she is due 15 days after she quit.
Daily Rate of Pay Calculation
45 hours/week ¸ 5 days/week = 9 hours/day
8 hours/day x $10.00 per hour = $80.00
1 hour/day overtime x $15.00/hour (1½ x $10.00) = $15.00
$80.00 + $15.00 = $95.00 daily rate of pay
Note that her regularly scheduled overtime is included in calculating the daily rate of pay for purposes of determining the amount of the waiting time penalty.
In this example, she is entitled to twelve days’ wages as the penalty because the employer has 72 hour (3 days) to pay final wages when an employee quits without giving at least 72 hours prior notice of his or her intention to quit.
So, 12 days x $95.00/day = $1,140.00 waiting time penalty.
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