Final Pay At Time of Termination Clarification


By Jennifer Jacobus, PHRca, SDEA CEO

The timing of final paychecks is straight forward in the state of California.  If an employee is terminated without notice, employers must provide their final pay, including accrued but unused vacation or PTO, at the time of termination.  If the employee quits without notice, the employer has calendar 72 hours to get the employee their final check. If the employee quits providing at least 72 hours’ notice, the employee must be provided their final check on their last day.

What hasn’t been so clear is what happens when an employee is laid off or furloughed with the intent of bringing the employee back to work.  Does this constitute a termination where the above rules apply?

In a recent court case, Hartstein v. Hyatt Corp., in which employees were laid off due to a slowdown caused by Covid, Hyatt did not provide a return-to-work date, hoping it would be no more than eight to twelve months and even continued to pay health benefits for two months.  What they did not do was provide the employees who were furloughed with their final pay at the time of the layoff.  Hyatt’s argument was that they had every intention of bringing the employees back to work, so they were not, in fact, terminated.  Hyatt held fast to their belief that California laws on the timing of final wages at time of termination did not apply.

The California Division of Labor Standards (DLSE) has interpreted the California Labor Code’s section on timing of final wages to mean that if an employee is laid off without a specific return date within the normal pay period, then the employer must comply with final check laws.

In this case, the Ninth Circuit of Appeal adopted the DLSE’s rationale and sided with Hartstein in the class action against Hyatt Corp.

The take-away here is that employers who furlough their employees when there is no return-to-work date within the same pay period must pay final wages, including accrued vacation or PTO, at the time of the lay off or furlough. Employers should also provide the “Notice to change in relationship” indicating that the employee has been furloughed, and the EDD pamphlet “For your benefit”. Even though the employee has not been officially terminated, they would still be eligible for unemployment benefits due to reduced hours.

Terminations can be tricky.  SDEA is HeRe with you, give us call if you have questions.  858-505-0024.

Contact us: 858.505.0024