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California’s code governing paydays and payroll deductions seems like it should be rather simple, but it’s perhaps the most complicated employment law in the state. Full of traps for the unwary, the law can spell big trouble for even innocent mistakes.

The state’s Division of Labor Standards administers this area of the law, which covers all private employers, even those with only one employee. It requires at least two paydays per calendar month unless the employer specifically sets a more frequent pay period.

Employers must pay all wages earned between the 1st and 15th of the month by the 26th of the month, and all wages earned between the 16th and the last day of the month by the 10th of the following month. If you pay weekly, biweekly or semimonthly, you must dispense paychecks within seven days after the pay period ends. Overtime wages earned in one pay period may be delayed until no later than the payday for the next pay period.

For most terminated employees, you must issue their final paycheck immediately upon discharge. Some industries have special rules on paying terminated workers. For more information, go to www.dir.ca.gov/dlse/FAQ_paydays.html.

Caution: Beware of the waiting-time penalty for failure to pay terminated employees in accordance with state law. For each day you delay issuing their final paychecks (up to a maximum of 30 days), you must pay them an amount equal to their daily pay.

Payroll deductions

California employers can make deductions from an employee’s paycheck under three conditions:

  1. When required or empowered to by state or federal law (i.e., taxes).
  2. When an employee expressly authorizes a deduction for employee benefits
  3. When the employee is working under a collective bargaining agreement that authorizes deductions for health, welfare or pension programs.

Employers can get in trouble if they attempt to make other deductions. For instance, California courts and labor law limit when an employer can make deductions for cash shortages, such as a short checkout drawer. You may deduct shortage monies from an employee’s check only if you have proof that he or she dishonestly took the money. You can’t recover money lost through the employee’s negligence or carelessness.

Similarly, you can’t make deductions for lost or broken tools or equipment. California courts expect employers to bear such losses as a cost of doing business. Also, you may not charge employees for any photographs, uniforms, bonds or medical examinations that you require of them.
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Excerpted from California's 10 Most Critical Employment Laws, a special bonus report available to subscribers of HR Specialist: California Employment Law.
 

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