Bounced Payroll Checks

• Under California law, an employer is guilty of violating the California Labor Code if it pays wages or fringe benefits with a check that is subsequently returned or refused for insufficient funds or when an employer fails to properly establish a bank account. Employers guilty of violating these sections of the California Labor Code are liable for late payment of wage penalties from the date paychecks were initially due until the date an employee receives payment, limited to 30 days.
  
  

Exceptions to Late Payment Penalties

• An employer who proves that it unintentionally bounced an employee's paycheck due to insufficient funds has an affirmative defense against the assessment of late wage penalties by the labor commissioner. Furthermore, an employer who pays the service charge assessments under a civil action is relieved from further liability.
  
  California law also assesses liability to employers for insufficient funds if employees deposited their paychecks within 30 days. In other words, an employee who waits more than 30 days to deposit his paycheck cannot sue his employer for late payment penalties, and his employer is only required to pay the insufficient fund fees and wages without further liability. The California Labor Code also contains an exception for employers' liability when using bonding companies to pay their employees.
  
  

Penalties

• California law imposes steep late payment penalties on employers who fail to pay their employees by their established pay dates. Known as "waiting time" penalties, an employer can be liable for paying up to 30 days in back wages for each day of late payment. For instance, if an employee deposits a paycheck within 30 days, and the paycheck is dishonored or returned because of insufficient funds, he has presumptive evidence that his employer failed to pay him. For each day of late payment, his employer may be required to pay him for a whole day of work, limited to 30 days.
  
  

Considerations

• Since state laws can frequently change, do not use this information as a substitute for legal advice. Seek advice through an attorney licensed to practice law in your state.