Unpaid Wages & California’s Labor Code: When & How Wages Must be Paid

Under federal and California law, it is illegal for employers to not pay their workers on time. Unfortunately, unpaid wage disputes are common and many employers do not pay employees their full wages on time. California's Labor Code has endorsed a strong public policy to encourage all employers to make full payment of wages on time. Employees need their full wages to be paid on time so they can afford for their necessities.

The federal Fair Labor Standards Act and California’s Labor Code and Industrial Welfare Commission laws protect the wages and salaries of workers in several ways. It is important to note that federal law and California law provide different levels of protection and remedies for unpaid workers. Fortunately, the law that applies to your case will be the law that protects you the most.

This article provides an overview of the California Labor Code on the topic of unpaid wages. If you have questions, be sure to consult with an employment attorney in your area.

Protections for Unpaid Workers: Employees vs. Independent Contractors.

In California, the extent of a worker’s right to wages or benefits will often depend on whether they are classified as an “employee” or an “independent contractor.” Generally, only employees—not independent contractors—have a legal claim to unpaid wages or overtime compensation. So, what is the difference between an employee and an independent contractor?

To determine whether an unpaid worker is an independent contractor or an employee, courts look at these factors:

  • Whether the worker has the right to control the manner and means of performance.
  • Whether the employment relationship may be terminated at will.
  • Whether the worker engages in an occupation or business distinct from the employer's.
  • Whether the type of work performed is usually done under the employer's direction, or by a specialist without supervision.
  • The degree of skill required to perform the work.
  • Who provides the instrumentalities, tools, and place of work.
  • The length of time for which services are to be performed.
  • Whether the worker may hire and fire others
  • Whether payment for work is by time, piece, rate, or job.
  • Whether the services are part of the employer's regular business.
  • And whether the parties believe they are creating an employment or independent contractor relationship.

Employers sometimes wrongly classify employees as independent contractors. From the employer’s perspective, they might believe that this will save them money in benefits and taxes. For example, independent contractors are not employees covered by wage and hour laws. Independent contractors, however, have other legal remedies for unpaid work.

Employers who wrongly classify an employee as an independent contractor could face stiff penalties. The independent contractor, therefore, might have remedies directly against the employer for unpaid wages.

Even though a contract may designate someone as an independent contractor, this classification may be wrong. Ultimately, California law makes the final determination whether an unpaid worker is an independent contractor or an employee.

Pay Timing: When is pay due under the California Labor Code?

While an employee is still employed, the timing of payment depends on the employee's status as either: hourly, salaried, or commissioned. It also depends on the kind of compensation at issue. For instance, wages, bonuses, benefits, or vacation pay may all be treated differently.

Unpaid Wages and Hourly Employees.

Generally, for hourly employees, wages must be paid at least twice during each calendar month. Certain employees, however, may be paid once per month if they are an executive, administrative, or professional employee covered by the Fair Labor Standards Act.

For those employees entitled to pay twice per month, two periods of pay are required. Labor performed between the 1st and 15th of the month must be paid between the 16th and 26th of the same month. Labor performed on the 16th and the end of the month must be paid for on pay days between the 1st and 10th of the following month. After these times, unpaid wages are considered late and stiff penalties may be available against the employer.

If a payday falls on a Sunday or a holiday, employers may pay employees on the next business day.

Wages for overtime must be paid no later than the pay for the next regular payroll period.

Executive, Administrative, and Professional Employees.

Executive, administrative, and professional employees are entitled to pay only once a month. That pay must be made on or before the 26th day of the month that the labor was performed.

Determining who is an executive, managerial or professional employees is fact intensive and subject to particular case law and statutes.

Special Situations Where the Rules are Different.

Wage and hour laws are subject to several nuances. Non-hourly workers or workers in special positions, for instance, may have different rights in demanding their unpaid wages. This sections provides a brief overview for employees in these special circumstances.

Agricultural Workers.

Work performed between the 1st and 15th every month must be paid between the 16th and 22nd of the month. Work performed between the 16th and end of the month must be paid by the 7th of the following month.

Garment Workers.

If the employees who haven’t been paid are garment workers, they often have a right to seek wages from multiple businesses. Garment workers are defined as the workers involved in the sewing, cutting, assembling or otherwise preparing of apparel and accessories.

In California, any person or business that contracts with another company to manufacture garments guarantees that legal wages are paid. So, even if the contracting business is not the employer of the garment worker, the garment worker may have a right to pursue their unpaid wages from them. Both the employer and the contracting company are liable to pay the minimum wage and overtime compensation garment workers.

Take, for example, John Doe, who works at Manufacturer Corp.—a company that manufactures apparel. If Retail Inc. hires Manufacturer Corp. to make clothes, Retail Inc. becomes liable to pay John Doe any unpaid minimum wage or overtime that is due. So, John Doe can recover his unpaid wages from either Manufacturer Corp. (his employer) or Retail Inc. (the contractor).

This rule arises out of Labor Code section 2673.1, which is designed to prevent garment business owners from hiding their assets and avoiding payment for salaries.

Building Subcontractor Employees.

Like garment workers, subcontractor employees often have rights against multiple businesses. A general building contractor who hires an unlicensed subcontractor is responsible for unpaid wages owed to the subcontractor's employees. This is because Labor Code section 2750.5 makes an unlicensed subcontractor the general contractor's “employee.”

Commissions Owed to Employees of a Vehicle Dealer.

Employees of licensed vehicle dealers usually earn commission wages on their sales. Those commissions are due once per month on a designated payday. The employer must designate a regular payday in advance. These rules, however, are not applicable to unionized employees where a collective bargaining agreement exists.

Temporary Service Employees.

Employees hired by a temporary services agency must be paid weekly, even if the assignment didn’t end during that week. However, if an employee is assigned to work on a day-to-day basis and reports to the temporary services agency at the completion of the assignment, wages are due and payable at the end of the day.

Discharged Employees.

Discharged employees must be paid all unpaid compensation owed to them immediately. Discharge refers, not only voluntary termination, but also to release of employees after completion of a specific job assignment.

Employees who Resigned.

In general, if an employee resigns, their unpaid wages must be paid within 72 hours of their resignation. However, if the employee gives more than 72 hours of notice of their intention to quit, they have a right to all of their unpaid wages at the time of quitting. These rules, however, do not apply if the employee was under a contract for a definite period of time.

Payment Method: Cash, Checks, and Cards.

In general, the standard way to pay employees is a paycheck. That check, however, must be payable to the employee in cash, without a discount, at an established place of business (normally a bank). In other words, the employee must have a right to cash the check at the appropriate bank without a fee. The bank’s name must appear on the check.

Employers are obligated to have sufficient funds (or sufficient credit at the bank) to pay the issued check for at least thirty days.

In some situations, an employer may give their employees the option of using a payroll debit card to receive their wages. The employer, however, may not require that employees accept this method of payment.

If employees choose to use an employer-issued payroll or debit card, the employees must have the ability to access the cash funds at banks or ATMs. The employees may not be charged a fee to use the payroll or debit cards. Also, the employee must be given an itemized paystub with the card.

Wage Disputes: An Overview.

Unpaid wage disputes between businesses and workers are common. During those disputes, however, workers and employers alike have certain rights and duties.

Undisputed wages must be paid during wage disputes.

If there is a dispute over the amount of wages that are to be paid to an employee, the employer must pay, without any conditions, all wages that are not in dispute. An employer cannot hold back all wage payments if there is only a dispute to a portion of the employees’ wages.

Wage payment can only be demanded from an employer.

In general, there must be an employer and employee relationship to create certain rights. Determining where an employment relationship exists can be difficult, especially when multiple people or entities control and direct workers activities.

Imagine this situation: ABC Corp. hires a worker, but a different corporation, XYZ Corp., has the right to assign work to the worker. Who is the employer? The situation becomes even less clear if an entirely different third company pays the worker.

To determine the party responsible for the payment of wages, a strong factual analysis must be performed. The analysis should look at factors like: who exercises control over the wages, who determines the hours, and who decides the working conditions of the employee.

For instance, employees of a franchise can only seek their unpaid wages from the individual franchise owner and not from the main franchisor. In other words, an employee of a franchise restaurant may only request their unpaid wages from the operator of the particular franchise they work at. An employee in most cases cannot recover their unpaid wages from the corporate franchisor because there is no employer/employee relationship.

Employment agencies are employers.

Temporary employment agencies and the employers who contract with them are considered employers under the law. Joint liability for wages can be placed on both the temporary employment agency and the entity that supervises the work.

Penalties against Employers for Violating Wage Laws.

Every employer faces penalties for paying wages late. An employee may receive up to 30 days of wages for late payment of wages. For example, if an employee makes $15 an hour and works 8 hour a day their daily rate would be $120. $120 is multiplied by 30 work days for a total of $3,600.

An agent, manager, or officer of a company can face imprisonment of up to six months and a fine up to $1,000 dollars if there is an ability to pay and a willful refusal to pay after a demand. Employees can also be entitled to:

  • Interest on unpaid wages.
  • Reasonable attorney’s fees.
  • The cost of a lawsuit.

California's Labor Code protects against retaliation.

Some employees are hesitant to ask their employers for back pay. Many employees worry about being fired, being singled out for poor treatment, or being the victim of threats. Fortunately, California's Labor Code provides protection for employees who assert their legal rights for their earned wages. Any employer who retaliates against any employee for asserting their employment rights can face significant financial penalties and fines.

What can I do if my employer does not pay my owed wages?

  • Check for notices. Look for the notice at your workplace that states pay days, time, and place of payment. An employer must clearly post a notice specifying regular paydays and the time and place of payment. Check to see if the time to pay wages has passed yet.
  • Act Fast. If you not been paid yet, act quickly. civil claims for owed wages have a short statute of limitations of between two to four years. Depending on the type of claims, other time limits may be even shorter than that.
  • Get a commitment. Consider speaking to your employer and obtaining a firm commitment to pay your wages.
  • Explore your options. Consider looking for a new job. In every state of the economy, looking for a job is hard. Although many employees like their work and often feel loyalty for a company, missing pay periods is a strong sign that the company is having problems that may repeat themselves in the future.
  • Get an attorney. In many cases, your rights can be best handled by an attorney. They can assist you by advising you of your rights, preparing communications to your employer, or filing claims with the appropriate governmental bodies.
  • File a claim. Contact the California Department of Industrial relations to file a wage claim. Their website is located at http://www.dir.ca.gov/dlse/

How can an attorney help?

We understand that it’s often a hard to speak to your boss or supervisor about back pay and owed wages. If you do not speak up, however, you might not be paid at all. Your weeks or months of hard work could go to waste. At Optimum Employment Lawyers, we can help you protect your employment rights, your livelihood, and your job. If you are in Los Angeles or Orange County, give us a call at (949) 954-8181 to schedule a no charge consultation.

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References

29 U.S.C. § 218, subd. (a); Aguilar v. Association for Retarded Citizens (1991) 234 Cal.App.3d 21, 34–35.
Labor Code, § 1194.
S.G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341, 351.
Narayan v. EGL, Inc. (9th Cir. 2010) 616 F.3d 895, 904.
Labor Code, § 204.
Labor Code, § 204, subd. (a).
Labor Code, § 204.
Civ. Code, § 9.
Labor Code, §§ 204, subd. (a), 204.2.
Labor Code, § 2671, subd. (b).
Labor Code, § 204.1.
Labor Code, § 201.3, subd. (b).
Labor Code, § 201, subd. (a).
Smith v. Superior Court (2006) 39 Cal.4th 77, 90.
Labor Code, § 202.
Labor Code, § 212, subd. (a)(1).
Id.
Ltr from Div. of Labor Standards Enf. (State of Cal.) to Carl Morris & Daniel Schwallie re Payroll Debit Cards (July 7, 2009), available at http://www.dir.ca.gov/dlse/opinions/2008-07-07.pdf.
Id.
Labor Code, § 206, subd. (a).
Martinez v. Combs (2010) 49 Cal.4th 35, 64.
Id. at 59–60.
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Gould v. Maryland Sound Industries, Inc. (1995) 31 Cal.App.4th 1137, 1150.
Labor Code, § 207.
Code Civ. Proc., §§ 337, 339.