California law provides for significant penalties against employers who fail to pay employee wages in a timely manner. While state courts are responsible for the final interpretation of the statutes, many wage claims are investigated and determined by California Labor and Workforce Development Agency though the Department of Industrial Relations, Division of Labor Standards Enforcement, commonly referred to as “the labor board”.
The consequences set out in the labor code include misdemeanor criminal charges against employers for the willful or intentional failure to pay wages on scheduled pay dates. For example, CA Labor Code §201 requires at least semi-monthly payment of wages on designated dates. If an employer fails to pay employees as scheduled, criminal charges could be filed. Monetary penalties are likely in many instances as well. While first-time penalties may be as low as $100 per incident (See Labor Code §225.5), subsequent violations provide for a penalty of $200 plus twenty-five percent of the wages owed to the employee.
Even more significant are penalties for the failure to pay final wages to employees. Pursuant to CA Labor Code §203, employers may be assessed “waiting time” penalties of up to 30 days of an employee’s regular rate of pay if they fail to pay wages immediately upon termination (or within 72 hours if an employee voluntarily quits). If an employee is normally paid $300 per day, for example, the penalty itself could amount to $9,000 owed by the employer—a staggering amount.
These are striking reasons for employers to ensure their payroll is handled competently, by trained employees or a professional payroll service. Not only is it critical to verify that employees are paid on time, but also that they are paid for the correct number of hours worked, including overtime. This requires sound policies and practices for capturing time worked, which should include built-in redundancies to confirm work records are reliable.
Additionally, any internal wage claims filed by employees should be met with assurances to employees that a prompt investigation will take place and any wages owed will be paid to them immediately. When employees are given reasons to believe their requests are taken seriously by an employer, and they understand that the employer is committed to paying them as required by law, employees will typically have little reason to escalate their grievances by filing a formal wage claim with the labor board or a lawsuit in court, which can be costly to the employer.
Overall, the most important factors in avoiding formal wage claims are a commitment from management and communication with employees. The employment attorneys at Gehres Law Library, P.C. would be happy to provide you with additional information about the steps you can take to ensure your small business is not at risk for a wage claim. Contact us anytime for a free evaluation.