In California, all wages (including base pay, unused vacation, vested bonuses or commissions, etc.) are due on the termination date, subject to a few, narrow exceptions. Employees who resign with less than 72 hours notice are due their wages within 72 hours of the termination date. These provisions are contained within sections 201 and 202 of the Labor Code. There are various statutory exceptions applicable to certain industries.
This requirement by law generally applies to state agencies. However, state employees may elect to transfer accrued leave pay to a retirement account rather than take payment. The state is deemed timely if it makes that transfer within 45 days of termination.
When employers pay employees after the deadline, Labor Code section 203 says that employers owe a penalty of one day's pay for each day that the pay is late, up to a maximum of 30 days' pay. (Example: employee earns $100 per day. Employer is 31 days late with final pay. Employer owns penalty of 30 X $100 = $3,000). The failure to pay must be "willful," which is a liberal definition and means that the employer intentionally did not pay what was owed. Mistakes may not be deemed "willful" but many are. Genuine disputes over what is owed (such as the calculation of a commission "earned" as of the termination date) do not count as "willful."
Attempting to avoid penalties, the state argued that "retirement" is not "quitting" under the Labor Code. McLean and the state argued the dictionary definition and other issues to the court of appeal. Not surprisingly, to me anyway, the court of appeal held that a retirement is a type of "quit."
So, when a person "retires," that person also "quits" within the meaning of Labor Code section 202. If you think this post is too long, consider that it took about 14 pages for the court to get there.
This case is McLean v. California and the opinion is here.
