All paychecks must be payable in cash, on demand and without discount at some established place of business in the state, the name and address of which must appear on the paycheck. At the time the paycheck is issued and for at least 30 days after, sufficient funds or credit in the payroll account must exist for the paycheck’s payment.1
Paying any wage with a check backed by insufficient funds is unlawful. The dishonored check constitutes evidence that you violated the law.2 Payment by means of an insufficient check can subject an employer to waiting time penalties.3 However, the Legislature did not intend absolute criminal liability for all cases of issuing paychecks with insufficient funds. In cases where insufficiency results from unforeseen or unpreventable circumstances, violation of the statute becomes excusable.4 For more information on penalties for insufficient funds for payroll, see “Insufficient Paycheck Funds” in
Wage and Hour Enforcement and Penalties.
The law does not prohibit you from using an electronic transfer system, such as direct deposit, to transfer wages to a bank, savings and loan or credit union pursuant to an employee’s voluntary choice and authorization. You cannot force employees to use a direct deposit system.5
Public employers, including California and all local governments, do not fall under provisions that establish time and form of payment.6
Employers have long used prepaid debit cards to issue payroll. Employees without bank accounts will find the debit cards a secure, convenient and inexpensive means of accessing payroll without opening a bank account or paying hefty check-cashing fees. For employers with international employees or vendors, the prepaid debit card can be a faster and less expensive alternative to traditional funds exchange options and can simplify the transfer of regular global payments. Finally, in some instances, you may even find prepaid debit cards a cheaper, simpler and more secure alternative to direct deposit.
Two DLSE opinion letters state that the use of payroll debit cards and money network checks does not violate the Labor Code so long as all of the following conditions are met:
Consult with legal counsel before implementing a payroll program using pay or debit cards.7
California law contains very specific requirements for the information employers must put on employees’ wage statements, also known as a paystub, and imposes financial penalties on employers who don’t follow those requirements.
At the time wages are paid, you must provide each employee an accurate, itemized written wage statement.
What is a wage statement? Labor Code Section 226 describes a wage statement as an itemized written statement provided to employees either as a “detachable part of the check, draft or voucher paying the employee’s wages” or a separate writing if the wages are paid by personal check or cash.
Wage statements must contain all the required information on their face. A wage statement is not complete if an employee must refer to another document to get the required information.
Review wage statements for completeness and accuracy; do not assume the wage statements are accurate.
There are nine categories of information that must be included in wage statements. Additionally, there are paid sick leave requirements that must be included and requirements if you pay employees by piece-rate. The following information must be included:
As described below, additional information must also be provided on the wage statement relating to mandatory paid sick leave. Moreover, if you employ certain types of workers you will also be required to provide additional information on the wage statement.
Employees who are exempt from the payment of minimum wage and overtime under the Labor Code or the Wage Orders are not required to have their hours tracked and logged on an itemized wage statement.9
California’s mandatory paid sick leave law requires employers to provide employees with a written notice that sets forth the amount of paid sick leave available for use, or paid time off leave an employer provides in lieu of sick leave. Employers can provide the information on either:10
Employers with unlimited paid sick leave or paid time off policies can meet the payday notice requirement by indicating “unlimited” on either the itemized wage statement or the separate notice. With this type of policy, employees are not given a set number of days off but, instead, there is basically an honor system where employees can take time off whenever, and as often as, they like.
For more information see
Paid Sick Leave.
Existing law requires that the itemized wage statement given to piece rate workers must include the number of piece rate units earned and any applicable piece rate.11
Wage statements given to piece rate employees must also contain the following specific information for each payroll period:12
A California court of appeal ruled that employers do not have to include the monetary value of accrued paid vacation time on the itemized wage statement unless and until the accrued vacation is paid out when the employment relationship ends.
An employee sued Motel 6 under the Private Attorneys General Act, alleging that the motel failed to include the monetary value of accrued paid vacation time or paid time off (PTO) on pay stubs. Motel 6 sought to have the case dismissed before trial, arguing that the Labor Code doesn’t require an employer to itemize the monetary value of vacation balances.13
The employee argued that the pay stubs should have included vacation because vacation/PTO is considered a “wage” under California law, and employers must itemize “wages earned” on the pay stub (Lab. Code sec. 226(a)(1),(5)).
The court dismissed the employee's case and rejected the argument that vacation falls within the definition of “gross wages earned” and “net wages earned” which must be listed on the pay stub.
Under California law, vacation time is a form of “deferred wages” that is not payable until employment ends. Although the employee has vested rights to paid vacation during the time of his/her employment, the employee is not entitled to receive the monetary value of these wages until employment ends.14
In addition, the employer cannot ascertain the value of vacation time until separation. This is because “an employee is entitled to obtain the value of unused paid vacation at his or her ‘final rate.’”
Finally, the court noted that Labor Code section 226 is “highly detailed” and lists nine separate categories of information that must appear on the pay stub. Accrued paid vacation is not identified anywhere in this detailed list.
Accordingly, the court ruled that paid vacation time does not need to be included on the wage statement until employment ends.
One cautionary note: This case did not address the requirement to report paid sick leave on the pay stub.
On the itemized payroll statement furnished to employees, employers that are farm labor contractors must disclose the name and address of all legal entities (for example, other growers or other farm labor contractors) that secured the employer’s services.15
Farm labor contractors have other legal requirements relating to notice of wages. For example, farm labor contractors must have available for inspection by employees or growers a written statement in English and Spanish showing the rate of compensation he/she receives from the grower and the rate he/she is paying to employees for services rendered to, for, or under the control of the grower.16
The statement has to be provided to a current or former employee or grower within 21 calendar days or the farm labor contractor can be subject to a $750 fine recoverable by the employee or grower.17
For more information on special rules relating to farm labor contractors visit the
Department of Industrial Relations dedicated web page.
In addition, farm labor contractors, agricultural employers and agricultural associations that employ migrant or seasonal agricultural employees must include the employer’s identification number assigned by the IRS.18
A copy of the itemized wage statement and the record of deductions must be kept for at least three years at the place of employment or at a central location within the State of California. You must make these records available for employee’s inspection upon reasonable request. You must allow the employee to inspect and/or copy them.19 For more information, see
Access to Payroll File.
The copy an employer must maintain can be a duplicate of the itemized statement given to the employee or a computer generated record accurately showing all information required in the itemized statement.
A wage statement (also known as a paystub) is more than a piece of paper. It can be the source of a lawsuit. If employees believe their wage statements are not accurate, they can sue you — and the number of these lawsuits has increased dramatically in recent years. In particular, employees can file class-action and representative-action lawsuits under California’s Private Attorneys General Act (PAGA) for wage statement violations.
The potential liability in these types of lawsuits can be staggering. If a wage statement violation is common to all the members of a class or representative action, the total penalties can number in the hundreds of thousands — or even millions — of dollars.
If you do not provide the required statements to the employee in writing, or if you fail to keep the above records for the required three years, you are subject to civil penalties of $250 per employee per violation for the first violation and $1,000 per employee for each subsequent violation.20
If you make a clerical error or inadvertent mistake on the first violation, the Labor Commissioner has discretionary power not to penalize you.21
A knowing, intentional failure to provide the itemized wage statement information that results in an employee “suffering injury” entitles the employee to recover all actual damages or up to $50 for the initial pay period in which a violation occurs and $100 per employee for each violation in a subsequent pay period, up to a total of $4,000, plus costs and reasonable attorneys’ fees.22
The Labor Code specifically defines when an employee is considered to have “suffered an injury” with regard to employer provided wage statements, subjecting the employer to the penalty.23
First, an employee will be considered to suffer an injury for purposes of the penalty if the employer fails to provide a wage statement at all to the employee.
Second, an employee will be considered to suffer an injury if the employer (1) fails to provide accurate and complete information (as specified, see ”Statement of Wage Deductions” on this page ); and (2) the employee cannot “promptly and easily determine” the following from the wage statement alone:
“Promptly and easily determine” means a reasonable person would be able to readily ascertain the information without reference to other documents or information.
The law also states that a “knowing and intentional failure” does not include an isolated and unintentional payroll error due to a clerical or inadvertent mistake. In determining whether an employer complied, a factfinder may consider whether the employer, prior to an alleged violation, has adopted and is in compliance with a set of policies, procedures, and practices that fully comply with this section.
Nonexempt employees must also receive specific wage and employment information at the time of hire. For specific information, see “Providing Wage Information Upon Hire” in
The Labor Commissioner published a revised wage notice that contains information regarding paid sick leave. For more information see
Paid Sick Leave.
You cannot ask or require an employee to forego wages due or “execute a release” of wages due. The phrase “execute a release” includes requiring an employee, as a condition of being paid, to sign a false statement of the hours he/she worked during a pay period. Employers who violate this law are guilty of a misdemeanor.24
1.Lab. Code sec. 212
2.Lab. Code sec. 212
3.Lab. Code sec. 203.1
4.People v. Hampton, 2236 Cal. App. 2d 795 (1965)
5.Lab. Code sec. 213
6.Lab. Code sec. 220
7.DLSE Opinion Letters 2008.07.07 and 2008.07.07.2
8.Lab. Code sec. 226
9.Lab. Code sec. 226(j)
10.Lab. Code sec. 246 (h)
11.Lab. Code sec. 226
12.Lab. Code sec. 226.2
13.Soto v. Motel 6 Operating, L.P., 4 Cal.App.5th 385 (2016)
14.Suastez v. Plastic Dress-Up Co., 31 Cal.3d 774 (1982)
15.Lab. Code sec. 226
16.Lab. Code sec. 1695(a)(5)
17.Lab. Code sec. 1695(a)(5)
18.29 CFR sec. 500.80(d), Migrant and Seasonal Worker Protection Act
19.Lab. Code sec. 226
20.Lab. Code sec. 226.3
21.Lab. Code sec. 226.3
22.Lab. Code sec. 226
23.Lab. Code sec. 226(e)
24.Lab. Code sec. 206.5