California employers – public and private – must promptly pay all earned and unpaid wages (i.e., “final wages”) to employees who are discharged or quit. When employers fire an employee, they must pay the final wages at the time the employee is fired. When an employee quits, final wages are due immediately when the employee provides 72 hours prior notice, or within 72 hours after a quit without notice. But what about employees who retire? A recent Supreme Court decision determined that those employees “quit,” and are entitled to final wages on the same timeline as other quitting employees.
In McLean v. State (Cal. 2016) 1 Cal.5th 615, McLean retired from her employment with the State of California and did not receive her final wages on the day of her retirement or 72 hours later. She sued on behalf of herself and a class of former State of California employees who retired and did not receive final wages within 72 hours of their retirement. The trial court determined that Mclean retired, but did not “quit,” and dismissed the claim. The court of appeals reversed, determining that prompt payment of final wages applied because McLean “quit to retire.” The Supreme Court agreed with the court of appeal, and affirmed its determination on the issue because a retiring employee stops, ceases, or leaves employment just like other employees who “quit.”
As is now clear, final wages are available to employees who are voluntarily or involuntarily separated from employment, whether they leave because of a discharge, quit or retirement. Just as the obligation to promptly pay final wages applies to employees who retire, so does the penalty for failure to promptly pay final wages. The penalty is that the employee’s wages will continue until the final wages are paid, up to a maximum of 30 calendar days. So, coordinate with payroll and make sure departing employees are paid on time.