Terminating the Employment Relationship

P OST -S EPARATION O BLIGATIONS

Section 8

This portion of the workbook discusses common issues an employer must consider immediately after an employee is terminated. Failure to fulfill post-separation obligations can lead to liability and/or substantial penalties.

A. F INAL P AYMENT OF W AGES When an employment relationship ends, an employer has a duty to pay the employee his or her final wages, including unused, accumulated paid time-off. California Labor Code sections 201 and 202 require employers to pay final wages within a short period of time. Note that these sections do not apply to counties, cities or other municipal corporations. 376 The following discusses common sources of final wages, but is not exhaustive of wages that an employer might need to pay to a terminated employee.

An employer should consult its personnel rules and any applicable memorandum of understanding to determine what wages or benefits must be paid upon separating an employee.

LCW Practice Advisor

1. A CCRUED V ACATION Wages that must be paid at termination obviously include any salary and benefits. Wages also include accrued vacation, which, unless otherwise provided by a collective bargaining agreement, must be paid to as wages at an employee’s “final rate” in accordance with such contract of employment or employer policy respecting eligibility or time served. 377 The term “final rate” is not defined by the statute or court decisions. Additionally, the California’s Division of Labor Standards Enforcement has not interpreted the term in its enforcement manual or opinion letters. The language does indicate the payment should be made in accordance with the employee’s contract of employment, which in most cases will be a memorandum of understanding. 2. A CCRUED S ICK L EAVE Sick leave is created solely by the terms of an agreement or contract between the employer and the employee. There is no independent right to sick leave in California. Furthermore, an employee in California does not have a legal right to cash out his or her sick leave upon termination of employment. However, employers can choose, or may agree with a bargaining unit, to provide a cash out of part or all of an employee’s sick leave.

Terminating the Employment Relationship ©2019 (s) Liebert Cassidy Whitmore 123