The last two posts discussed 6 of the errors that are made by employers. To see those mistakes, read the prior posts at https://affordablebookkeepingandpayroll.com/?p=683 and https://affordablebookkeepingandpayroll.com/?p=686. Below are 4 more ways a business owner may inadvertently be breaking the law.
Mistake #7: Failure to give an employee’s final paycheck timely
Labor laws state when wages must be paid to an employer. State laws may differ, so the rules stated here are for California. If an employee gives 72 hours’ notice or more, they must be paid their final wages at the time of quitting. If they give no notice, all wages must be paid within 72 hours of quitting. If an employee is fired, they must be presented with their final paycheck immediately.
If an employee who quit or was terminated has company property (a laptop, cell phone, etc) it is tempting to hold their last check until the items are returned. However, this is illegal in California. You must pay the wages timely and try to get the items back without the threat of unpaid wages.
Failure to pay wages timely will result in a penalty of one day’s wages for each calendar day the wages are unpaid up to 30 days.
Mistake #8: Provide loans to employees and then deduct the payment from the paycheck
Deductions from paychecks are allowed if they are authorized by law or the employee for benefits offered by the employer. Typical deductions are federal/state withholding, FICA taxes, and disability insurance. Additional deductions may be for child support, unpaid past due taxes garnished by agencies, medical insurance premiums, etc.
Loans to employees generally should not be made. If the employer does loan funds, a written agreement should be drawn up stating the amount loaned, the date payments are due, and the amounts to be paid.
Mistake #9: Having Employees Sign Non-Compete Agreements
Most non-compete agreements are illegal in California. You can have forms signed stating customer lists, intellectual property, etc, are property of the company, but an employee can not be prevented from working for the competition. This infringes on an employee’s ability to work and earn an income should employment with your company not work out due to either the company’s or the employee’s choice.
Mistake #10: Having a Use It or Lose It Vacation Policy
Anything considered wages must be paid, and vacation hours (if offered by the company) are considered wages. If an employee has not taken all vacation at the time of their leaving, the remaining amount must be paid with the final paycheck.
To prevent the large accumulation of vacation hours, a cap may be established. Once that cap is reached, no additional hours are accrued until vacation hours have been used.
I hope this information has been helpful. For more information regarding California labor laws, see http://www.dir.ca.gov/.
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