Most California employers know an employee’s final paycheck must include all unpaid wages and accrued and unused vacation, if any. The final paycheck is due on the employee’s last day if she is terminated or quits with at least 72 hours notice. If the employee quits without that notice, the final paycheck must be paid within 72 hours.
What may not be readily understood is the timing if an employee is paid her final paycheck but also offered a severance payment. Severance agreements and payments are completely unrelated to an employee’s final paycheck. Specifically, severance payments must be provided to employees to review and counsel with an attorney according to the following guidelines:
- For an employee who is under 40 years old and offered a severance agreement to review and sign, she must be given at least 5 business days to review it before signing. The employee must also be advised to consult with an attorney. The employee may waive the review period and sign right away. If the employee is under 40, you can deliver the check immediately.
- For an employee who is over 40 years or older terminated must be given 21 days to review the agreement and consult with an attorney. An employee can waive this period and sign right away. However, the severance should not be paid for at least 7 days, because an employee 40+ has a week to revoke the severance agreement.
- For an employee who is over 40 but laid off through an exit incentive program covering multiple employees, she must be given 45 days to review the agreement and consult with counsel. She can waive the review period and sign right away. However, do not pay severance for at least 7 days.
California law imposes “waiting time penalties” against an employer that does not pay out all money owed when required, unless there is a bona fide dispute as to what is owed. The penalty is equal to the employee’s daily rate of pay x the number of days late the final check is ultimately paid, up to a maximum of 30-days. If forced to sue, an employee is entitled to interest and her attorney’s fees assuming she prevails.