California Final Pay: Meeting the Deadline When a Provider Runs Payroll

In California, final pay is due immediately when an employer lets someone go. An employee who quits with at least 72 hours’ notice must be paid on their last day, and one who quits without that notice within 72 hours. None of these deadlines waits for the next payroll run.

That matters most when someone else runs your payroll. A payroll provider, PEO or employer of record (EOR) can only pay on time if it has the departure date, the final figures and the money before the last day. This guide covers what goes into the final payment, how it can be paid, who does what under each model, and what happens if it’s late. For overtime, taxes and the rest of California payroll, see our California payroll guide.

When is final pay due?

These are the general rules for employees who don’t have a written contract for a fixed term (Labor Code 201, 202; Labor Commissioner FAQ):

On the last row, the wage rules don’t require pay for the notice days the employee didn’t work, unless a contract or policy promises it. And 72 hours means 72 hours, not three business days.

Where it’s paid. On a discharge, at the place of discharge. When an employee quits, at your office in the county where they worked, unless they asked for it to be mailed or have authorized a direct deposit (Labor Code 208). Having no California office doesn’t change the deadline, so settle how the money will reach the employee before the last day.

Is the employment ending, or only an assignment? If a staffing assignment ends but the worker stays employed by the staffing company, final pay may not be due yet; temporary services employers follow their own weekly-pay rule (Labor Code 201.3). With a PEO or EOR, confirm whether the person’s employment is actually ending.

Industry exceptions. A few industries have their own deadlines. For example, project or daily-call employees in film and broadcast production are paid by the next regular payday, oil drilling layoffs within 24 hours (excluding weekends and holidays), and seasonal fruit, fish or vegetable canning and drying within up to 72 hours (Labor Code 201, 201.5, 201.7). Most office roles follow the general rules above.

What goes into the final payment

Check the actual vacation or PTO policy: plans called “PTO” don’t all work the same way, and advanced vacation that hasn’t been earned can’t be deducted from final pay. Our guide to adapting a PTO policy for California explains how combined banks, caps and early use work. Where you can, settle commission and bonus figures before the last day, since they may need input from outside payroll.

Why the normal payroll run may not work

A semi-monthly payroll with a cutoff several days before payday can’t pay someone on the day they’re let go. An international wire or a currency conversion takes time too. None of that moves the deadline, which is set by law, not by the provider’s schedule.

Two payment-method rules also apply:

• Direct deposit. Routine direct-deposit authorizations end when employment ends. Final pay can still go by direct deposit if the employee has voluntarily authorized that deposit, into an account at a bank, savings and loan or credit union with a place of business in California, and the payment is made by the deadline (Labor Code 213(d)). Starting a transfer is not the same as paying on time.
• Cheque. A paper cheque must be payable in cash, on demand and without discount at a place of business in California, with enough funds behind it for at least 30 days (Labor Code 212).

No law requires an “off-cycle run” as such. But if the regular run can’t meet the deadline, some other lawful payment has to. Late notice, missing figures or late funding make that harder; they don’t move the deadline.

Hypothetical example: a company in London lets its San Diego employee go at 4 p.m. on a Friday, which is midnight in London. Final pay is due at that meeting. If the provider heard about it that morning and the money is in a UK account, paying on time depends on things arranged earlier: a payment route, funds in place and someone who can approve the payment.

Who does what under each model

Handing payroll to someone else changes who does the work. It doesn’t, by itself, change who is responsible. Use this table as a checklist for your agreement: confirm who the employer is, or employers are, and who does each step.

A provider’s funding cutoff is a contract term. If the money arrives late, the employee’s legal deadline doesn’t move.

Who can be liable. With a payroll provider, you remain the employer: the provider does the work, but the wage duties stay with you. With a PEO or EOR, the provider’s role as an employer doesn’t settle the question by itself. A client that directs the work may also be treated as a joint employer, as our article on using an EOR when you have a US entity explains. California also makes some clients share liability for wages and penalties with the company that supplies their workers (Labor Code 2810.3). That rule has limits: it covers work in the client’s usual course of business on its premises or worksite, and it excludes, among others, exempt executive, administrative and professional employees and businesses with fewer than 25 workers.

If you’re choosing an EOR, settle this before you sign: ask who calculates and pays final wages, how quickly, and what the provider needs from you (what to ask about exit terms). If you have your own US entity and want payroll handled for you, our US payroll service runs payroll through your entity.

If final pay is late or wrong

If an employer willfully fails to pay final wages on time, the employee’s daily wage continues as a penalty for each calendar day until paid, up to 30 days (Labor Code 203). At $400 a day, the full 30 days comes to $12,000, on top of the wages themselves.

• Willful means the employer intentionally didn’t pay wages that were due. It doesn’t need bad intent, and being unable to pay is not a defense (waiting-time penalty FAQ).
• The penalty stops when the wages are paid or a court action is filed. A wage claim with the Labor Commissioner doesn’t stop it, and paying late doesn’t undo the days already counted.
• The daily rate includes regularly scheduled overtime, but not occasional overtime.
• A good-faith dispute that wages are owed, with a reasonable basis, prevents the penalty even if the employer later loses that point. An unsupported excuse doesn’t (8 CCR 13520).
• Pay what isn’t disputed on time and without conditions. It can’t be held back until the employee signs a release (Labor Code 206).

If you find an error after the employee has left, correct it and pay the difference straight away.

Final pay checklist

1. Confirm whether the employment is ending, how (discharge, layoff, or resignation with or without 72 hours’ notice), and the date and time.
2. Tell whoever runs payroll as soon as the decision is made: the date, the type of departure and the final hours.
3. Gather the figures: hours and overtime to the last day, commissions, any earned bonus, and the vacation or PTO balance.
4. Confirm the payment method: a direct deposit the employee has authorized for final pay, or a cheque that meets California’s rules.
5. Make sure the money is in place before the provider’s cutoff.
6. On a discharge, layoff or leave of absence, give the EDD pamphlet “For Your Benefit” (DE 2320) and a written notice of the change in employment status, by the effective date (22 CCR 1089-1; EDD notices).
7. If the employee had health coverage, notify the plan. Federal COBRA covers employers with 20 or more employees and Cal-COBRA insured plans of employers with 2 to 19; in both cases the plan generally hears from the employer within 30 days and then sends the employee the election notice (Department of Labor; DMHC). This runs separately from final pay.
8. Send the wage statement with the payment, and keep the calculation, the statement, the deposit authorization, the notices and proof of payment.