California takes the rights of its contractors seriously. In addition to the AB5 law, California also has waiting time penalties for employers that don’t pay their employees correctly and on time.
For production companies, the legal and financial consequences of a non-compliant contractor payroll system can be disastrous.
If you don’t pay your freelancers accurately and on time, you could find yourself owing tens of thousands of dollars in wait time penalties–or getting seriously sued.
Sounds pretty bad, huh? Well, LÜK is here to help! LÜK offers producers and talent the perfect payroll solution that handles payroll, compliance, worker’s comp, and more–so you never have to worry about California waiting time penalties again.
But first, let’s break down waiting time penalties in California and how they may apply to you.
What are Waiting Time Penalties in California?
In California, waiting time penalties are imposed on employers who willfully fail to pay final wages to an employee immediately upon termination or within 72 hours if the employee resigns without notice. These penalties are authorized under the California Labor Code Section 203.
California Labor Code 203
So, what is the California Labor Code 203?
The California Labor Code 203 imposes a waiting penalty on employers intentionally withholding final paychecks from employees who have quit or were terminated. The penalty amount is the employee’s daily wage for each day the check goes unpaid, which can last up to 30 days.
Employees who believe they have been wronged under Section 203 may file a wage claim with the California Division of Labor Standards Enforcement or file a lawsuit to be paid the wages owed, plus waiting time penalties, attorney’s fees, and court costs.
Waiting Time Penalties in California for Final Paychecks
To be eligible for waiting time penalties, an employee must generally be entitled to receive wages that weren’t paid promptly. The penalties are not awarded if the employer can demonstrate that the delay in payment was due to a good faith dispute over the wages or if there was a genuine inability to pay due to circumstances outside of the employer’s control.
Employee Resigns
If you informed your employer within 72 hours or more before your last work day, it’s mandatory for them to pay your final pay. This paycheck has to be issued on your final day.
The employer cannot wait until the next period to send you your final paycheck since you no longer work there. Your employer must settle your final paycheck on your departure date, which can be done via direct deposit or a paper check.
In the event that you resign without providing a minimum notice of 72 hours—effectively resigning immediately—your employer is given a window of 72 hours to process and issue your last payment.
If the employer does not pay the employee on time or within the 72-hour window, they will have to pay the employee’s daily wage at work. This can last for up to 30 days, and if the former employee worked from Monday to Friday, the penalty will also include Saturday and Sunday.
Employee is Terminated
Employees terminated from their role or job must be paid for all the hours worked, including the day of their termination. Payment must be made the same day as the termination–not the next day, next week, or the next pay period.
However, there are a few exemptions:
- Seasonal employees working in specific food industries can be paid up to 72 hours after their termination date
- Any employee who is working in the film industry must receive their final pay on the next regular payday
- For an employee who works in the oil industry, their final pay must come no later than 24 business hours after their last day
If the employer fails to pay the employee or tampers with the paycheck’s amount in any way, it will result in the employer receiving a misdemeanor charge.
Vacation Pay
In California, taking a vacation or PTO is considered the same as other wages. Any employee with leftover PTO who has been terminated or resigned from their position must be paid their remaining PTO amount.
There are a few exceptions to this; however, the employer puts in place a probationary period or waiting period before vacation time can be used. Or the employer places a cap on how vacation days accumulate. There is no cap limit, but California vacation laws are extremely strict on what they view to be a reasonable cap limit.
Overtime Wages
For overtime wages, the waiting time penalty can apply if the overtime wages are part of the final wages owed to the employee at the time of termination or resignation. This means that if an employee is not paid their earned overtime wages in their final paycheck, they may be entitled to receive a day’s worth of wages for each day the payment is late for up to 30 days.
The penalty is calculated by multiplying the employee’s daily wage by the number of days the wages are late, not exceeding 30 days. The daily wage would include any overtime the employee would have normally worked.
Amounts Missing
If an employee receives a paycheck with an amount withheld or missing, the employee is allowed a two-week waiting penalty. This is also true for employees who were not paid their remaining PTO wages.
Late Paychecks
The practice for late payment of wages or paychecks is similar to the waiting penalty for overtime wages.
For any employer who fails to pay an employee their final paycheck for any reason receives a waiting time penalty each day that employee is not paid. The penalty is the equivalent of the employee’s daily wage, and this waiting period can last up to 30 days.
In addition to the final paycheck and daily wage accumulated during the waiting period, employees may also receive interest for their unpaid wages and the cost of the lawyer and court fees.
More About Waiting Time Penalties in California
Exceptions to Waiting Time Penalties In California
While waiting time penalties are strictly enforced in California, there are some exceptions and circumstances under which an employer might not be required to pay these penalties. Here are some of the key exceptions:
- Good Faith Dispute: If there’s a legitimate, good faith dispute over whether any wages are due, waiting time penalties may not apply. A good faith dispute that any wages are due occurs when an employer presents a defense based on law or fact, which, if successful, would prevent any recovery on the part of the employee.
- Voluntary Resignation Without Notice: If an employee voluntarily quits without adequate notice, the employer has 72 hours to provide the final paycheck. Waiting time penalties would not start until after these 72 hours have passed.
- Employee’s Fault: If the failure to receive timely payment is due to the employee’s actions, such as failing to provide the correct address or not submitting required paperwork, the waiting time penalties may not be set against the employer.
Can an Employee Claim Waiting Time Penalties If They Resign Voluntarily?
Yes, an employee in California can claim waiting time penalties even if they resign voluntarily, provided the employee did not receive any pay before the state’s deadline. The timing for paying final wages in the case of voluntary resignation depends on whether a 72-hour notice was given before their resignation. If so, their final pay should include any remaining PTO or vacation.
However, as stated before, if the employee doesn’t provide the employer with a minimum of 72 hours notice, the employer has 72 to pay the employee without penalty.
How to File Waiting Time Penalties in California
To file waiting time penalties, you can file a wage claim through the Department of Division of Labor Standards Enforcement. After you’ve filed your claim, you’re assigned a Deputy Labor Commissioner who will determine how best to proceed based on the circumstances of the claim and information presented. The action that can be taken regarding your claim can be a referral to a conference, hearing, or dismissal of the claim.
An employee can also file a lawsuit in civil court for their claims.
Avoid Wait Time Penalties in California
As an employer or someone who hired talent for their production, you need to pay your talent for their work and on time. You could face waiting penalties if you don’t pay your employees on time. So, how can you avoid missing payments?
Start using a payroll service to help manage and send payments to all talent, employees, crew members, and any other independent contractors. And we have the perfect payroll solution for you!
LÜK streamlines the payment process for employers and contractors, offering a centralized platform for all entertainment payroll needs. We handle the billing and legal, giving you the peace of mind that your talent is paid accurately and on time. On top of that, LÜK makes sure you’re in compliance with local state labor laws so you avoid paying out of pocket for other fees and penalties.
We’d love to show you how it works.
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