Terminating the Employment Relationship

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 the employee’s 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 a n employee’s sick leave. 3. O VERTIME AND C OMPENSATORY T IME O FF Wages also include other forms of vested, paid time-off, including accrued compensatory time off (“CTO”), which some employers allow an employee to choose in lieu of overtime. An employee shall upon termination be paid for unused accumulated CTO at the higher of: (1) the employee’s final regular rate of pay, or (2) the employee’s average regular rate of pay during the last three years of employment. 388 All overtime paid pursuant to the federal Fair Labor Standards Act (FLSA) must be paid at one and one half times the employee's regular rate of pay. 389 Under the FLSA, t he term “regular rate of pay” does not mean an employee’s base or contractual rate of pay. Rather, the FLSA regular rate of pay is based upon all compensation for employment except for certain excluded payments. Longevity pay, educational incentive pay and senior/master officer pay are all types of compensation that must be included in an employee’s regular rate of pay under th e FLSA. 390 The phrases “final regular rate of pay” and “average rate of pay” involve calculations that are beyond the scope of this workbook, but are discussed in detail in Liebert Cassidy Whitmore’s FLSA (Fair Labor Standards Act) Guide. 4. P OTENTIAL P ENALTIES FOR W ITHHOLDING W AGES Failure to pay an employee wages upon termination could subject an agency to penalties. The Labor Code provides that if an employer willfully fails to pay any wages of an employee who is discharged or who quits, the wages of the employee shall continue as a penalty from the due date thereof at the same rate until paid or until an action is commenced. A separated employee may file a lawsuit for these penalties at any time before the expiration of the statute of limitations on an action for the wages from which the penalties arise. 391 B. U NEMPLOYMENT I NSURANCE B ENEFITS R EQUIREMENTS A frequent issue that arises upon separation of employment is unemployment benefits. In order to be eligible for unemployment compensation, a claimant must be an employee of the employer as determined under common law. 392

Employers often challenge a claim or appeal the State’s determination for unemployment compensation on the grounds that an employee was terminated for good cause, or the employee

Terminating the Employment Relationship ©2022 (s) Liebert Cassidy Whitmore 127