WHEN AN EMPLOYEE QUITS OR IS TERMINATED, CAN THE EMPLOYER WITHHOLD THE FINAL PAYCHECK UNTIL THE NOW EX-EMPLOYEE RETURNS COMPANY PROPERTY?

No.  An employer in California is not permitted withhold a final paycheck until its property is returned.  The employer needs to pay the final paycheck on termination (if the employer terminated) or within 72 hours (if employee quit without notice) and seek recovery of the property in a separate (court) action.

Labor Code section 201 provides in pertinent part:  “(a) If an employer discharges an employee, the wages earned and unpaid at the time of discharge are due and payable immediately.“ 

Labor Code section 202:  (a) If an employee not having a written contract for a definite period quits his or her employment, his or her wages shall become due and payable not later than 72 hours thereafter, unless the employee has given 72 hours previous notice of his or her intention to quit, in which case the employee is entitled to his or her wages at the time of quitting. Notwithstanding any other law, an employee who quits without providing a 72-hour notice shall be entitled to receive payment by mail if he or she so requests and designates a mailing address. The date of the mailing shall constitute the date of payment for purposes of the requirement to provide payment within 72 hours of the notice of quitting.

There is no “return of property withholding” exception. 

PENALTY FOR VIOLATION:

Labor Code section 203:  (a) If an employer willfully fails to pay, without abatement or reduction, in accordance with Sections 201 . . . 202 . . . , any wages of an employee who is discharged or who quits, the wages of the employee shall continue as a penalty from the due date thereof at the same rate until paid or until an action therefor is commenced; but the wages shall not continue for more than 30 days. An employee who secretes or absents themselves to avoid payment to them, or who refuses to receive the payment when fully tendered to them, including any penalty then accrued under this section, is not entitled to any benefit under this section for the time during which the employee so avoids payment.

WHEN MAY AN EMPLOYER WITHHOLD OR DIVERT PAY:

Labor Code section 224 provides the circumstances under which an employer may withhold or divert pay:  “when the employer is required or empowered so to do by state or federal law [e.g., income taxes or wage garnishments] or when a deduction is expressly authorized in writing by the employee to cover insurance premiums, hospital or medical dues, or other deductions not amounting to a rebate or deduction from the standard wage arrived at by collective bargaining or pursuant to wage agreement or statute, or when a deduction to cover health and welfare or pension plan contributions is expressly authorized by a collective bargaining or wage agreement.”

There is no “state or federal law” which allows an employer to withhold final pay (of a terminated employee) as a condition to an employer receiving its property back.

Disclaimer

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