Wages In California, the Basics

On behalf of Anderlini & McSweeney LLP in Employment on Tuesday, February 4, 2014.

California wage and hour laws affect workers throughout the San Francisco Bay Area. These laws are designed to protect the rights of workers. Wage and hours claims may arise when people are not receiving minimum wage, not being paid for overtime, or not being allowed to take a rest break or a lunch break. Despite these laws, some employers still fail to pay for overtime, rest breaks, lunch breaks, vacation pay and minimum wage. Employers who fail to comply may be required to pay unpaid overtime compensation, liquidated damages, attorneys’ fees and court costs for violating employee rights. For some violations, the employer may even have to pay overtime from the previous four years, and punitive damages. To understand when these laws apply, you first need to understand what are constitute “wages.”

What Are Wages?

Under California law all amounts for labor performed by employees of every description, whether the amount is fixed or ascertained by the standard of time, task, piece, commission basis, or other method of calculation as wages. (Labor Code §200(a))  This definition seems clear and basic, but it is so expansive that some things that do not immediately come to mind may legally be considered wages too.

Aside from the money you make, what are considered wages?

The definition of wages above includes not only monetary earnings of employees but also the other benefits to which an employee is entitled as a part of her compensation.

Vacation Pay

Vacation pay is a wage, rather than a gratuity or a gift, because it is earned for services performed. An employer may adopt a policy specifying the amount of vacation pay an employee is entitled to be paid as wages depending on the length of service, so be sure to check if your employment agreement limiting your maximum vacation hours. Failure to pay accrued vacation time upon termination is a common basis for wage and hour claims.

Commission Pay

Commission pay is a wage. If an employer hires a worker who is paid involving commissions, the employment agreement must be put into writing and set forth the method by which the commissions shall be computed and paid. (Labor Code §2751(a).)  The employer is also required to give each commissioned employee a signed copy of the contract and obtain a signed receipt for the contract from the employee. (Labor Code §2751(b).) Employment  termination, whether voluntary or involuntary, does not cut off an employee’s right to a sales commission once the sale is completed.

Other Wages

Bonuses and profit-sharing plans are also considered, as are severance packages. If an employer requires its employees to wear uniforms at work, the employer must furnish the uniform and pay for its upkeep – even this is considered an employee wage.

When Must Wages Be Paid?

Hourly employees generally must be paid semimonthly (subject to certain limited exceptions.) Wages earned between the 1st and 15th of the month must be paid between the 16th and 26th. Wages earned between the 16th and the end of the month must be paid between the 1st and 10th of the following month. (Labor Code §204.)

Employees paid on a weekly, biweekly or semi-monthly basis must be paid within seven days after the close of each payroll period. (Labor Code §204.)

All wages for labor in excess of the normal work week must be paid no later than the payday for the next regular payroll period.

Payment Upon Termination Or Resignation

An employer who discharges an employee must immediately pay all compensation due and owing. (Labor Code §201(a).) “Discharge” includes not only being involuntarily fired from an ongoing job, but also release from employment upon completion of a specified job assignment or time duration for which an employee is hired. [Note: This does not apply to employees of temp agencies]

When an employee resigns, the employer must pay all compensation due and oweing within 72 hours of resignation, or on the employee’s last day of work, if the employee gives more than 72 hours’ notice of resignation. (Labor Code §202.)

Penalty For Delay

When an employer willfully fails to pay wages to an employee who quits or is fired, the employee’s wages continue as a penalty until paid, for up to 30 days. (Labor Code §203.) These penalty wages accrue on a daily basis, not only on days that the employee might have worked, but also on nonworkdays.

Vacation pay is treated the same as all other forms of compensation upon termination. Accrued vacation pay must be paid to the employee immediately upon an employer initiated termination and within 72 hours of an employee’s resignation. So called “use it or loose it” vacation pay policies are illegal – an employer must compensate the terminating employee for unused vested vacation time. An employment contract cannot provide for forfeiture of vested vacation time upon termination. (Labor Code §227.3.) Because vacation pay is a form of deferred wages, a right to the paid vacation is earned as the work is performed and thus protected from forfeiture.

If you have a concern regarding non-payment of wage and hour compensation you may be entitled to legal recourse. Contact an experienced wage and hour attorney in your area to discuss your situation if you feel you are being treated unfairly.

About Anderlini & McSweeney LLP

Anderlini & McSweeney LLP is a boutique law firm located in the heart of the peninsula in the San Francisco Bay Area. www.anderlinimcsweeneylaw.com
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