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  • Rybicki & Associates P.C.

Final Pay – Rules Worth Reviewing

With many employers winding up seasonal operations, now is a good time to review California’s final-pay rules. Violating these requirements can be serious, sometimes resulting in waiting-time penalties up to thirty times an employee’s daily average wage.

When Must Final Pay be Made?

California Labor Code section 201 requires private employers who terminate an employee to pay accrued wages immediately upon discharge. Section 201 applies to all private-industry employers with few limited exceptions. The same rule applies to employees who quit their employment so long as they provide seventy-two hours’ notice before their departure.

Employees who terminate without providing seventy-two hours’ notice are treated differently. Under Labor Code section 202, wages are due seventy-two hours after the employer receives notice an employee is leaving (e.g., three days later for employees who quit without any notice). Employers who want to take advantage of this additional time are required to mail the final paycheck if an employee requests and provides a mailing address.

Determining an employee’s final workday day is not always easy. Temporary agency employees, for example, often leave a worksite when their assignment ends without knowing when or where their next assignment will be. California adopted a special rule, effective in 2009, for these employees. Under Labor Code section 201.3, bona-fide temporary services workers must be paid at least once a week but need not receive final pay for an assignment until the following week – even if there are no assignments before that time.

This does not apply to other types of temporary employees, or even to all temporary employee providers; farm labor contractors, for example, are excluded. It also does not apply to many employees on daily assignment and to employees working during a client’s labor dispute (such as those working during a strike or lockout), who must be paid each day.

There are special rules for other industries as well, such as those with workers curing, canning, or drying perishable fruit, fish, or vegetables; motion-picture and live event venue employees; and the oil drilling industry.

What Must Be Paid?

Final pay does not just include regular weekly wages. In California, all accrued vacation must be paid out at the employee’s final rate of pay. Sick leave (including California’s mandatory paid sick leave requirements) need not be cashed out, but other vacation-like benefits – such as PTO and personal days – must be paid as well.

Bonuses, commissions and other incentive payments must also be paid to the extent they are readily calculable (that is, if you can tell what they are).

Where an employee’s commissions are straightforward, for example, they should be paid without waiting for the next regular payout date. Where commissions or bonuses are difficult to determine, as when based on overall profitability, employers probably are justified waiting until an accurate determination can be made.

How Can Final Pay Be Made?

As noted above, employees who quit and are not paid immediately can ask for their pay to be mailed. This does not mean you can pay any other employees the same way. Final pay for quitting employees should be made at the regular pay location, usually an employee’s usual workplace, unless expressly authorized in writing by the employee. An employer must pay a discharged employee at the place of discharge.

Employers cannot unilaterally elect to mail the final pay and should not do so without written direction of the employee. Final payment by mail is deemed paid when an employee actually receives the pay, not when it was mailed, leading to substantial penalties if an employee claims the check was lost or misdirected. Don’t fall into that trap.


California’s final pay requirements can be confusing, especially where the employee does not simply pay all accrued wages before an employee leaves the premises. Employers should always consult with counsel or another qualified consultant if their payroll practices differ from the general rules set by Labor Code sections 201 and 202. Many a claim has been magnified, sometimes substantially, when a tiny payment was not made on time.


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