Please read below to learn about the following subjects:

• earned wages

• overpayment of wages

• minimum wage

• deductions from wages

• loans from employers

• overtime and double-time wages

• work week limits

• severance pay

• health insurance and life insurance

• COBRA

• Pensions (ERISA)

• vacation pay

• sick leave

• holiday pay

Earned Wages

Under California law, all wages owed are due immediately upon termination of employment.  Similarly, failure to pay an employee his regular wages on time is a violation of California labor laws. An employee is entitled to a day's pay for every day the employer is late in paying the employee all wages she has earned.

Minimum Wage

A minimum wage is the lowest hourly, daily or monthly wage that employers may legally pay to employees or workers. Under California law, the minimum wage is $8.00 per hour. The federal minimum wage is $6.55 per hour effective July 24, 2008.

Deductions From Wages

An employer can lawfully withhold amounts from an employee’s wages only: (1) when required or empowered to do so by state or federal law, or (2) when a deduction is expressly authorized in writing by the employee to cover insurance premiums, benefit plan contributions or other deductions not amounting to a rebate on the employee’s wages, or (3) when a deduction to cover health, welfare, or pension contributions is expressly authorized by a wage or collective bargaining agreement. Labor Code Sections 221 and 224.  Money may not be deducted from an employee’s wages to pay for salaries, bonuses, wages of other employees, failure to clock in and out, or uniform cleaning.  Some common payroll deductions that are unlawful are gratuities (tips), photographs of the employee, bonds, uniforms, business expenses, and medical and physical examinations. Your employer cannot legally make such a deduction from your wages if, by reason of mistake or accident a cash shortage, breakage, or loss of company property/equipment occurs. The California courts have held that losses occurring without any fault on the part of the employee or that are merely the result of simple negligence are inevitable in almost any business operation and thus, the employer must bear such losses as a cost of doing business. For example, if you accidentally drop a tray of dishes, take a bad check, or have a customer walkout without paying a check, your employer cannot deduct the loss from your paycheck.

Loans

Overtime & Doubletime Wages

Under California law, you are entitled to 1 and ½ times your regular hourly wage rate for every hour after the 8th hour you work in the same day.  This is overtime pay. You are also entitled to overtime pay for work beyond 40 hours in the same week under federal law.  However, you are entitled to two times your regular hourly wage rate for every hour after the 12th hour you work in the same day.  This is doubletime pay.  Overtime is due after 8 hours per day or 40 hours per week unless an alternative workweek of no more than 4 days of 10 hours was established.  Premium pay on 7th day not required for employee whose total weekly work hours do not exceed 30 and whose total hours in any one work day thereof do not exceed 6, in specific wage and hour orders.

Certain employees may not benefit from the overtime laws. For instance, certain truck drivers who driver between states are exempt because of the nature of their work. This is referred to as the Motor Carrier Exception.

A salaried employee must be paid overtime unless they meet the test for "exempt" status. Please refer to our discussion of exempt status here. Exempt status will lawfully deprive an employee of legal protections such as the overtime (1 1/2x) and doubletime (2x) premiums, minimum wage, reporting time pay, employer compensation for uniforms and equipment, and meal and rest periods..

Nondiscretionary Bonuses and Overtime Pay

A bonus is money promised to an employee in addition to the monthly salary, hourly wage, commission or piece rate usually due as compensation. Bonuses are in addition to any other remuneration rate and may be predicated on performance over and above that which is paid for hours worked, pieces made, or sales completed. A bonus may be in the form of a gratuity where there is no promise for their payment, for example, a holiday bonus at the end of the year. Additionally, a bonus may be a contractually required payment where a promise is made that a bonus will be paid in return for a specific result, such as exceeding a minimum sales figure or piece quota, or as an inducement to remain in the employ of the employer for a certain period of time. In general, an employee who voluntarily quits his or her employment before the payout date of the bonus is not entitled to receive the bonus.

Certain types of bonuses are included in the regular rate of pay for calculating overtime. They are known as nondiscretionary bonuses. Discretionary bonuses or sums paid as gifts at a holiday or other special occasions, such as a reward for good service, which are not measured by or dependent upon hours worked, production or efficiency, are not included for purposes of determining the regular rate of pay. A nondiscretionary bonus that is based upon hours worked, production and efficiency of the employee will figure into the hourly rate of pay for purposes of calculating overtime.

Work Week Limits

Under California law If you work more than 6 days in a row, you will be entitled to 1 and ½ times your regular hourly wage rate for every hour and one and one half times your regular hourly wage rate for every hour after the 8th hour you work in the same day.

Severance Pay

Ordinarily, an employee is not entitled to severance pay on the termination of his employment.  Similarly, employers are not ordinarily required to provide their employees with two weeks notice before firing them, though longer warning periods may be required for mass layoffs by larger employers.  However, the employee and employee may agree otherwise. Employees should refer to their employer’s policy with respect to severance pay. Severance pay plans provided by an employer pursuant to the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. (ERISA), are subject to federal law.

Health Insurance and Life Insurance

There is no requirement under California law for employers to provide employees with medical or life insurance. Employees should refer to their employer’s policy with respect to medical and life insurance benefits. However, an employer who provides employee medical benefits and discontinues those benefits must provide employees with written notice at least 15 days in advance of the discontinuance of coverage. A terminated employee may be entitled to continued coverage under the federal COBRA act or California's continued coverage requirements.

COBRA

COBRA provides certain former employees, retirees, spouses former spouses, and dependent children the right to temporary continuation of health coverage at group rates. This coverage, however, is only available when coverage is lost due to certain specific events. Group health coverage for COBRA participants is usually more expensive than health coverage for active employees, since usually the employer pays a part of the premium for active employees while COBRA participants generally pay the entire premium themselves. It is ordinarily less expensive, though, than individual health coverage.

Pensions (ERISA)

The Employee Retirement Income Security Act of 1974, or ERISA, protects the assets of millions of Americans so that funds placed in retirement plans during their working lives will be there when they retire. If an employer maintains a pension plan, ERISA specifies when an employee must be allowed to become a participant, how long they have to work before they have a nonforfeitable interest in their pension, how long a participant can be away from their job before it might affect their benefit, and whether their spouse has a right to part of their pension in the event of their death.  

The law requires plans to pay retirement benefits no later than the time a participant reaches normal retirement age. But, many plans, including 401(k) plans, provide for earlier payments under certain circumstances. For example, a plan's rules may provide that participants in a 401(k) plan would receive payment of his or her benefits after terminating employment.

ERISA protects plans from mismanagement and misuse of assets through its fiduciary provisions. ERISA defines a fiduciary as anyone who exercises discretionary control or authority over plan management or plan assets, anyone with discretionary authority or responsibility for the administration of a plan, or anyone who provides investment advice to a plan for compensation or has any authority or responsibility to do so. Plan fiduciaries include, for example, plan trustees, plan administrators, and members of a plan's investment committee.

Generally, if you are enrolled in a 401(k), profit sharing or other type of defined contribution plan (a plan in which you have an individual account), your plan may provide for a lump sum distribution of your retirement money when you leave the company.

However, if you are in a defined benefit plan (a plan in which you receive a fixed, pre-established benefit) your benefits begin at retirement age.  These types of plans are less likely to contain a provision that enables you to withdraw money early.Whether you have a defined contribution or a defined benefit plan, the form of your pension distribution (lump sum, annuity, etc.) and the date your pension money will be available to you depend upon the provisions contained in your plan documents.  Some plans do not permit distribution until you reach a specified age.  Other plans do not permit distribution until you have been separated from employment for a certain period of time.  In addition, some plans process distributions throughout the year and others only process them once a year.  You should contact your pension plan administrator regarding the rules that govern the distribution of your pension money.

ERISA requires that plans disclose when you begin to participate in the plan, how your service and benefits are calculated, when your benefit becomes vested, when you will receive payment and in what form, and how to file a claim for benefits.  

Vacation Pay

There is no legal requirement in California that an employer provide its employees with either paid or unpaid vacation time. However, if an employer does have an established policy, practice, or agreement to provide paid vacation, then certain restrictions are placed on the employer as to how it fulfills its obligation to provide vacation pay. Under California law, earned vacation time is considered wages, and vacation time is earned, or vests, as labor is performed. For example, if an employee is entitled to two weeks (10 work days) of vacation per year, after six months of work he or she will have earned five days of vacation. Vacation pay accrues (adds up) as it is earned, and cannot be forfeited, even upon termination of employment, regardless of the reason for the termination. An employer can place a reasonable cap on vacation benefits that prevents an employee from earning vacation over a certain amount of hours and, unless otherwise stipulated by a collective bargaining agreement, upon termination of employment all earned and unused vacation must be paid to the employee at his or her final rate of pay.

Advanced Vacation Pay and Leave

Your employer cannot deduct "advanced" vacation (i.e., vacation that is taken before it is earned or accrued) from your final paycheck. Because of work schedules and the wishes of employees, many employers allow employees to take their vacation before it is actually earned. Under California law, vacation benefits are a form of wages, and an employer's practice of allowing employees to take their vacation before it is actually earned or accrued is in effect an advance on wages. Thus, if an employee takes an advance on vacation and then quits or is discharged before all of that advanced vacation is earned or accrued, the effect is that there has been an overpayment of wages which is a debt owed to the employer.

Paid Time Off

Where an employer replaces its separate arrangements for vacation and sick leave with a program whereby employees are granted a certain number of "paid days off" each year that can be used for any purpose, including vacation and sick leave, the employees have an absolute right to take these days off. Consequently, again applying the principles of equity and fairness, DLSE takes the position that such a program is subject to the same rules as other vacation policies. Thus, for example, the "paid time off" is earned on a day-by-day basis, vested paid time off days cannot be forfeited, the number of earned and accrued paid time off days can be capped, and if an employee has earned and accrued paid time off days that have not been used at the time the employment relationship ends, the employee must be paid for these days.

Sick Leave

If an employer has a sick leave policy, the employer must permit an employee to use in any calendar year, the employee’s accrued and available sick leave, in an amount not less than the sick leave that would be accrued during 6 months at the employee’s current rate of sick leave, to attend to an illness of a child, parent, domestic partner, or spouse of the employee.

Holiday Pay

California law does not require that employers provide employees with paid time off for holidays, observe any holidays, or pay an employee any additional compensation for working on a holiday. Employees should refer to their employer’s policy with respect to paid holidays.