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Waiting Time Penalty

 

 

 

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Public policy in California has long favored the full and prompt payment of wages due an employee. To ensure that employers comply with the laws governing the payment of wages when an employment relationship ends, the Legislature enacted Labor Code Section 203 which provides for the assessment of a penalty against the employer when there is a willful failure to pay wages due the employee at conclusion of the employment relationship. Assessment of the waiting time penalty does not require that the employer intended the action or anything blameworthy, but rather that the employer knows what he is doing, that the action occurred and is within the employer's control, and that the employer fails to perform a required act.

Assessment of the penalty is not automatic however, as a "good faith dispute" that any wages are due will prevent imposition of the penalty.

In order for the penalty to apply, there must be a true employer-employee relationship and a quit or a discharge, which includes a layoff.

The penalty applies to the willful failure to pay "any wages," which refers to the definition of "wages" in Labor Code Section 200.  Thus, all compensation must be considered in determining if all wages due were paid as prescribed by law. "Wages" does not include expenses. In calculating the penalty, overtime wages are considered only if overtime is regularly scheduled each week. Occasional or infrequent overtime is not considered in the calculation of the daily rate of pay for purposes of computing the penalty.

The penalty is measured at the employee's daily rate of pay and is calculated by multiplying the daily wage by the number of days that the employee was not paid, up to a maximum of 30 days. This does not mean that the wages continue for a 30-day period, but that the employee may be entitled to up to 30 actual days' worth of wages. The 30-day period is calendar days, and includes weekends and holidays and any other days that the employee would not normally work. Payment of the wages or the commencement of an action stops the penalty from accruing. Filing a complaint in court commences an action. An employee's filing a claim with the Division of Labor Standards Enforcement (DLSE) is not considered the filing of an action, and does not stop the penalty from accruing.

The waiting time penalty is not wages, thus, no deductions are taken from the penalty payment.

Note: If the answer to any of the questions below states that the employee is entitled to the waiting time penalty, it is assumed that all of the conditions for imposition of the penalty exist and there is no good faith dispute that any wages are due.


1. Q. Seven days ago I gave my employer notice that I was quitting on Friday, which I did. I did not receive my final paycheck on that day, and on the following Monday called my former employer to find out when I would be paid. He informed me that my check was available and that I could come in and pick it up, and I told him I would do so. I purposely did not pickup my check until 10 days later, which was 13 days after I quit. Am I entitled to the waiting time penalty?

A. Yes, you are entitled to the waiting time penalty in the amount of three days' wages. In this situation, since you gave your employer at least 72 hours prior notice that you were quitting and quit on the date you said you would, the employer's obligation is to pay you all of your unpaid wages at the time of quitting. Labor Code Section 202 Since tender of payment of the final wages stops the penalty from accruing (in this case "tender of payment" is your former employer's informing you on the Monday following your quit that your check was available, and your telling him that you would pickup it up), you are entitled to only three days' wages worth of penalty.

You are not entitled to 13 days' wages worth of penalty because you purposely avoided picking up your check for ten days after you were informed it was available. Labor Code Section 203 provides that "An employee who secretes or absents himself or herself to avoid payment to him or her, or who refuses to receive the payment when fully tendered to him or her...is not entitled to any benefit...for the time during which he or she so avoids payment..."

2. Q. On Monday of last week I informed my employer in writing that Friday of that week would be my last day of work as I was quitting. On Friday as I was leaving work I asked my employer for my check. He told me he didn't have my check and that I would have to wait until the end of the payroll period when the payroll service prepared the semimonthly payroll checks. I asked if he would call me so I could come pickup my check, and he told me "no," he'd just mail it when he got it. Fifteen days after the day I quit I received my check in the mail. The envelope was postmarked three days prior to that date. Am I entitled to the waiting time penalty, and if so, in what amount?

A. Yes, you are entitled to a waiting time penalty in the amount of 15 days' wages. Under Labor Code Section 202, when an employee not having a written contact for a definite period quits his or her employment and gives 72 hours prior notice of his or her intention to quit, and quits on the day given in the notice, the employee is entitled to his or her wages at the time of quitting. Since you gave at least 72 hours prior notice of your intention to quit, quit on the day given in the notice, and did not receive your wages until 15 days later, you are entitled to a waiting time penalty in the amount of 15 days wages; the number of days between the date you were required to be paid and the date you were paid. Under these circumstances, the day you received the wages, and not the day they were mailed, is the date of payment and the day when the penalty stops accruing.

3. Q. I quit my job last week without giving 72 hours prior notice. On my last day of work I confirmed my current address with my employer and requested that she mail me my final wages. I received my wages in the mail six days after I quit. The envelope was postmarked two days after I quit. Am I entitled to the waiting time penalty, and if so, in what amount?

A.

You are not entitled to any waiting time penalty. Since you quit without giving at least 72 hours prior notice, the employer is obligated to pay you all of your unpaid wages not later than 72 hours (three days) after the date you quit. Labor Code Section 202  However, Section 202 also provides that when an employee quits without providing a 72-hour notice, he or she is entitled to receive payment of the final wages by mail if he or she so requests and designates a mailing address. In such a circumstance, the date of mailing constitutes the date of payment for purposes of the requirement to provide payment within 72 hours of the quit.

In your situation, since you confirmed your current address, requested payment by mail, and your final wages were mailed within 72 hours after you quit, payment was made in compliance with the law and thus, no penalty can be assessed notwithstanding the fact that you did not actually receive such payment until six days after you quit.

4. Q. If I quit my job without giving 72 hours prior notice and am not paid all of the wages due me within 72 hours after the time I quit, must I return to my former employer's place of business 72 hours after quitting and demand my wages in order for the waiting time penalty to apply?

A. The answer is "yes," as the general rule is that if you quit without giving at least 72 hours prior notice of your intention to quit, you must return to your former employer's place of business 72 hours after quitting and demand the wages that are due you in order for the waiting time penalty to apply. However, there are instances if the employer prevents you from returning for your wages, or the employer informs you that the wages will not be available even if you do return, whereby the penalty may apply. Such situations are handled on a case-by-case basis.

5. Q. If I quit my job without giving 72 hours prior notice and am not paid all of the wages due me within 72 hours after the time I quit, instead of returning to my former employer's place of business 72 hours after quitting and demanding my wages, can I just telephone, mail, email, or fax my demand after the 72 hour period and still be eligible for the waiting time penalty?

A. No, the waiting time penalty does not accrue to an employee who fails to return to the place of his or her former employment 72 hours after quitting, unless, of course, the employee has given at least 72 hours prior notice of intention to quit, in which event the wages are due at the time of quitting. Telephoning, mailing, emailing, or faxing your demand for your wages is not the equivalent of physically returning and asking for them, and does not meet the standard required by law. Labor Code Section 208  The general rule is that if you quit without giving at least 72 hours prior notice of your intention to quit, you must return to your former employer's place of business 72 hours after quitting and demand the wages that are due you in order for the waiting time penalty to apply.

6. Q. I was discharged from my employment two weeks ago. At that time I was paid all of my wages, but did not get reimbursed for any of my business related expenses until 10 days later. Am I entitled to the waiting time penalty, and if so, in what amount?

A. No, you are not entitled to the waiting time penalty. The waiting time penalty is assessed only when an employer willfully fails to pay an employee in accordance with Labor Code Sections 201, 201.5, 202, or 202.5, any wages of an employee who quits or is discharged. As you were paid all of your wages in accordance with the law and the reimbursement for business expenses is not wages, the waiting time penalty does not apply to your situation.

7. Q. I was discharged from my job two weeks ago. At that time I was paid the wages for all of the hours that I had worked, but was not paid for my 15 days of earned, accrued and unused vacation until 10 days later. Am I entitled to the waiting time penalty, and if so, in what amount?

A. Yes, you are entitled to the waiting time penalty in the amount of 10 days' wages. The waiting time penalty is assessed only when an employer willfully fails to pay in accordance with Labor Code Sections 201, 201.5, 202, or 202.5, any wages of an employee who quits or is discharged. Under California law, earned vacation time is considered wages; and under Labor Code Section 227.3, unless otherwise provided by a collective bargaining agreement, whenever an employment relationship ends for any reason whatsoever and the employee has not used all of his or her earned and accrued vacation, the employer must pay the employee at his or her final rate of pay for all such earned, accrued and unused vacation. In your situation, since your former employer was obligated to pay you all of your wages at the time you were discharged, including your 15 days of vacation wages, and did not do so, you are entitled to the waiting time penalty in the amount of 10 days wages, the number of days between the date you were discharged and the date you received all of your final wages, i.e., the 15 days vacation pay.

8. Q. How is the daily rate of pay calculated and the waiting time penalty computed?

A.

The following are examples of calculations of the daily rate of pay and computations of the waiting time penalty. In each instance, these examples assume all of the conditions for imposition of the penalty exist and that there is no good faith dispute that any wages are due.

  1. A security guard is discharged on Friday, July 12, 2002, and not paid all of her earned wages due until Monday, July 22, 2002, ten days later. She regularly worked 35 hours per week, Monday through Friday, and was making $8.00 per hour at the time of her termination.

    Daily Rate of Pay Calculation

    35 hours/week ¸ 5 days/week = 7 hours/day

    7 hours/day x $8.00/hour = $56.00/day (daily rate of pay)

    Waiting Time Penalty Calculation

    10 days, the number of days between the date the employer was obligated to pay the employee, July 12, 2002, and July 22, 2002, the date she is paid all of her wages. (See Labor Code Section 201, discharge of employee; immediate payment)

    10 days x $56.00/day = $560.00 waiting time penalty.

  2. A salesclerk is discharged on Friday, May 3, 2002, and not paid all of his earned wages due until Friday, June 14, 2002, 42 days later. He regularly worked 40 hours per week, Tuesday through Saturday, but during the last week of his employment he worked four hours of overtime. At the time of his termination, the employee was earning $10.00 per hour.

    Daily Rate of Pay Calculation

    40 hours/week ¸ 5 days/week = 8 hours/day

    8 hours/day x $10.00/hour = $80.00/day (daily rate of pay)

    This example shows that occasional or infrequent overtime is not included in calculating the daily rate of pay for purposes of determining the amount of the waiting time penalty.

    Waiting Time Penalty Calculation

    30 days. Although the employee was not paid all of his wages due until June 14, 2002, 42 days after the date the employer was obligated to pay him, the maximum penalty allowed under the law, is 30 days' wages. Labor Code Section 203

    30 days x $80.00/day = $2,400.00 waiting time penalty.

    This example shows that the maximum penalty allowed under the law is 30 days' wages.

  3. A fry cook voluntarily quit her job on Tuesday, July 2, 2002, without giving notice to her employer. She regularly worked 45 hours per week, Monday through Friday, and was making $10.00 per hour when she quit. She is paid all of her earned wages due on Friday, July 12, 2002, 10 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

    This example shows that regularly scheduled overtime is included in calculating the daily rate of pay for purposes of determining the amount of the waiting time penalty.

    Waiting Time Penalty Calculation

    7 days. The employee is entitled to only seven days' wages as the penalty because the employer has 72 hour (3 days, which in this example would be until July 5) to pay terminal wages when an employee quits without giving at least 72 hours prior notice of his or her intention to quit. (See Labor Code Section 202, quitting employee; payment within 72 hours)

    7 days x $95.00/day = $665.00 waiting time penalty.

    This example shows that the employer has 72 hours to pay terminal wages when no notice or less than 72 hours prior notice of intention to quit is given.

  4. A part-time file clerk voluntarily quit his job on Friday, March 15, 2002. On Friday, March 8, 2002, he gave his employer notice that he was quitting on the 15th of that month (more than 72 hours notice). He regularly worked two days per week, four hours per day. He was making $7.50 per hour when he quit. He is paid all of his earned wages due on Friday, April 5, 2002.

    Daily Rate of Pay Calculation

    4 hours/day x $7.50/hour = $30.00/day (daily rate of pay)

    Waiting Time Penalty Calculation

    21 days, the number of days from the date the employer was obligated to pay the employee, March 15, 2002, until April 5, 2002, the date he was paid all of his wages.

    21 days x $30.00/day = $630.00 waiting time penalty.

    This example shows that the waiting time penalty applies to employees regardless of whether they are part-time or full-time, and that when an employee gives at least 72 hours prior notice of intention to quit, and quits on the date given in the notice, the employer's obligation to pay all of the wages due is the date that the employee quits.

  5. A commission salesperson working for an appliance dealer is discharged on May 10, 2002. She is not paid her earned commission wages due until May 25, 2002, the regular payday. She regularly worked 40 hours per week, five days per week. For the last three full months of her employment, on average she earned $3,000.00 per month. As of the date of her discharge, May 10, 2002, all commissions since the end of the previous pay period had been earned and were calculable by the employer on that date. At the time of her discharge, the employee did not know the amount of commissions she had earned since her last pay period.

    Daily Rate of Pay Calculation

    $3,000.00/month x 12 months/year = $36,000.00/year

    $36,000.00/year ¸ 52 weeks/year = $692.31/week

    $692.31/week ¸ 5 days = $138.46/day (daily rate of pay)

    Waiting Time Penalty Calculation

    15 days, the number of days from the date the employer is obligated to pay the employee, May 10, 2002, until May 25, 2002, the date she is paid all of her wages.

    15 days x $138.46/day = $2,076.90 waiting time penalty.

  6. A salesperson is paid a fixed salary of $2,500.00 per month and a commission of 10% of sales she makes each month. She quits her job on March 15, 2002 after providing more than 72 hours notice of her intention to quit. She quits on the day given in her notice. For the past three months she has averaged $1,500.00 in commission wages each month. She regularly worked 40 hours per week, five days per week. She is paid her salary wages on March 15, 2002, the day she quits; however, she is not paid her commission wages until April 1, 2002, the regular payday for commissions. All commission wages were earned prior to March 15, 2002, and were calculable by the employer on that date.

    Daily Rate of Pay Calculation

    $2,500.00 base salary/month + $1,500.00 average commissions/month = $4,000.00 average wages/month.

    $4,000.00 average wages/month x 12 months/year = $48,000.00/year

    $48,000.00/year ¸ 52 weeks/year = $923.08/week

    $923.08/week ¸ 5 days/week = $184.62/day (daily rate of pay)

    This example shows how the daily rate of pay is calculated when two different types of wages are earned.

    Waiting Time Penalty Calculation

    17 days, the number of days from the date the employer is obligated to pay the employee, March 15, 2002, until April 1, 2002, the date she is paid all of her wages.

    17 days x $184.62/day = $3,138.54 waiting time penalty.

9. Q. Is overtime included in calculating the daily rate of pay for purposes of computing the waiting time penalty?

A. It depends. Regularly scheduled overtime is included in calculating the daily rate of pay for purposes of computing the waiting time penalty. On the other hand, occasional or infrequent overtime is not included in the calculation of the daily rate of pay for purposes of computing the waiting time penalty.

10. Q. I understand that if I am discharged from my job, or quit, and my employer willfully fails to pay me my final wages and there is not a good faith dispute that any wages are due, that I am entitled to a waiting time penalty of up to 30 days' wages. If my employer pays me 15 days after my final wages are due, am I entitled to the full 30 days' wages of penalty?

A. No, payment of wages or the commencement of an action stops the penalty from accruing. Filing in court commences an action. Filing a wage claim with the Labor Commissioner's office (DLSE) is not considered an action and does not prevent the waiting time penalty from continuing to accrue.

11. Q. I was discharged last week and not paid all my wages. At the time I was discharged my former employer informed me that he could not pay me because he didn't have the money. Will this be a valid defense to my claim for the waiting time penalty?

A.

No, it will not be a valid defense. Inability to pay is not a defense to the failure to timely pay wages under Labor Code Sections 201, 201.5, 202, and 202.5, and does not relieve the employer from liability of the waiting time penalty under Labor Code Section 203.

Other reasons commonly given by employers for not making a timely payment under Labor Code Sections 201, 201.5, 202 and 202.5 that do not relieve the employer of liability from imposition of the waiting time penalty are:

  • Payroll checks are only paid on regular paydays, and that is when you will receive your wages.

  • Our payroll department is out-of-state and cannot get us a check in time.

  • You still owe us money for the goods you purchased, and we are not going to pay you your wages until you pay us.
12. Q. Does the waiting time penalty apply to part-time and temporary employees, or just to full-time employees.

A. The waiting time penalty applies to all employees regardless of status, exempt, nonexempt, full-time, part-time, temporary, probationary, or otherwise. The penalty does not apply to independent contractors or volunteers, as they are not "employees."

13. Q. When computing the amount of penalty, do you count only the days I might have worked during the period for which the penalty accrues, or do you also include all non-workdays?

A. All non-workdays are included. When computing the penalty you count all of the calendar days for which the penalty accrues, including weekends, non-workdays (e.g., days off), and holidays.

14. Q. I am a salaried employee. For purposes of determining the waiting time, is one month's salary the same as 30 days' wages?

A.

No, one month's salary does not equate to 30-days wages. A salaried employee working five days per week will on average work 21.6 days per month (52 weeks/year ¸ 12 months/year x 5 days/week) in earning his or her full salary. However, since the waiting time penalty is calculated using a daily rate of pay, and can be up to 30 days' wages, the maximum penalty will always exceed a person's monthly salary. For example, assume that the maximum penalty of 30 days' wages is appropriate for a salaried employee who was making $2,500.00 per month at the time the employment relationship ended. In such a situation, the penalty would be $3,461.54, computed as follows:

$2,500.00/month x 12 months/year = $30,000.00/year

$30,000.00/year ¸ 52 weeks/year = $576.92/week

$576.92 ¸ 5 days/week = $115.38/day (daily rate of pay)

$115.38/day x 30 days = $3,461.54 (waiting time penalty)

15. Q. My employer failed to pay me my final wages within the time period prescribed by law and I believe I am entitled to the waiting time penalty. What can I do?

A. You can either file a wage claim with the Division of Labor Standards Enforcement (the Labor Commissioner's Office), or bring an action in court against your former employer to recover the wages if they are still due you, and to claim the waiting time penalty.

16. Q. What is the procedure that is followed after I file a wage claim?

A.

After your claim is completed and filed with a local office of the Division of Labor Standards Enforcement (DLSE), it will be assigned to a Deputy Labor Commissioner who will determine, based upon the circumstances of the claim and information presented, how best to proceed. Initial action taken regarding the claim can be referral to a conference or hearing, or dismissal of the claim.

If the decision is to hold a conference, the parties will be notified by mail of the date, time and place of the conference. The purpose of the conference is to determine the validity of the claim, and to see if the claim can be resolved without a hearing. If the claim is not resolved at the conference, the next step usually is to refer the matter to a hearing or dismiss it for lack of evidence.

At the hearing the parties and witnesses testify under oath, and the proceeding is recorded. After the hearing, an Order, Decision, or Award (ODA) of the Labor Commissioner will be served on the parties.

Either party may appeal the ODA to a civil court of competent jurisdiction. The court will set the matter for trial, with each party having the opportunity to present evidence and witnesses. The evidence and testimony presented at the Labor Commissioner's hearing will not be the basis for the court's decision. In the case of an appeal by the employer, DLSE may represent an employee who is financially unable to afford counsel in the court proceeding.

See the Policies and Procedures of Wage Claim Processing pamphlet for more detail on the wage claim process procedure.

17. Q. What can I do if I prevail at the hearing and the employer doesn't pay or appeal the Order, Decision, or Award?

A. When the Order, Decision, or Award (ODA) is in the employee's favor and there is no appeal, and the employer does not pay the ODA, the Division of Labor Standards Enforcement (DLSE) will have the court enter the ODA as a judgment against the employer. This judgment has the same force and effect as any other money judgment entered by the court. Consequently, you may either try to collect the judgment yourself or you can assign it to DLSE.

 

The Information on this page is reprinted from the website of the California Department of Labor Standards Enforcement. It reflects that department's view of California law (which may or may not be in accord with Federal law or the law of other states) and may or may not reflect the view of this law firm. No action should be taken in reliance on the information provided below without first contacting an attorney.

 
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