Suspending Employees Without Pay During Investigations Can Be Risky
You have strong reason to suspect that an employee has engaged in serious misconduct, such as theft or sexual harassment. But you don't want to fire the employee based solely on suspicion. So instead, you place the employee on unpaid leave until you're able to complete your internal investigation.
At the conclusion of the investigation, two weeks later, you find that your original suspicions were well founded. You let the employee go, paying out all eared wages and benefits at the time of termination.
The employee then files a claim for waiting time penalties—and wins. What went wrong?
When can California employees claim waiting time penalties? Find out my joining us on November 3 for the comprehensive 90-minute webinar: Final Paychecks in California: Common (and Costly) Pitfalls to Avoid
The California Division of Labor Standards Enforcement (DLSE) treats unpaid suspensions like layoffs. Under California law, if an employee is laid off or suspended without pay, and without a definite return-to-work date within the same pay period, the employee is legally deemed to have been terminated as of the date of the layoff or suspension.
This means a laid-off or suspended employee must be paid all earned wages and benefits (including earned but unused vacation or PTO time) on the day that the employee last performed any work.
If you don't, the employee will be entitled to receive waiting time penalties—calculated as 8 hours of pay for each day that the employee must wait for his or her final pay, capped at 30 days.
So if an employee is suspended during an investigation into possible misconduct and then is ultimately fired for good cause, you could still end up owing the employee additional pay for each day of the investigation period. If the employee sues you in court to get the waiting time penalties, you might have to pay the employee's legal fees as well.
In order to avoid liability for waiting time penalties during unpaid suspensions, investigations into employee misconduct should be completed within the pay period in which the employee is suspended.
Why You Can't Simply Pay Departing Employees on Your Normal Payroll Schedule
Calculating and administering final pay for departing workers raises a host of complicated questions. Is accrued vacation considered part of an employee's final pay? When is the final paycheck due? Does it matter whether the worker's employment ended voluntarily or involuntarily? These are just a few of the questions you must be prepared to correctly answer—or put your company at tremendous legal and financial risk.
Join us on Nov. 3 for an in-depth, interactive 90-minute webinar all about final paychecks. Our expert—a seasoned California labor and employment attorney—will answer the questions above. You'll also learn:
- Whether you can legally deduct for company property the departing worker has damaged or failed to return (such as keys, cellphones, laptops, and uniforms)
- How voluntary versus involuntary terminations could affect the timeline for issuing final pay
- How compensation owed for unused vacation time, sick time, and personal time is generally calculated
- What you can do if you've overpaid a worker
- How to respond if a worker claims you still owe compensation
- The penalties you could face for not complying with final paycheck rules
Find out more»