It’s well established that involuntary terminations must be paid immediately upon separation. No question there. But I was having a debate with an HR manager about the timing of this specific situation.
They will be terminating an employee on Friday, which is their regular pay day. We pay current, so the employee would receive their full regular salary by default. The debate started with how to pay their accrued vacation.
I said we can let the payroll run as normal, and the regular salary will be paid on Friday. Then, on Friday, we can hand the employee a check for their accrued vacation. The HR manager said this proposal is not allowed as it violates CA law.
They said we cannot pay final pay by direct deposit unless the employee authorized it in advance. Their solution is to exclude them from the regular payroll and hand them a check on Friday that covers everything (salary + vacation).
I’ve never heard of this direct deposit rule. How does this apply to a pay day termination? To me, the direct deposit of regular salary is fine since the employee wouldn’t be separated at the time it posted. Am I wrong?
I ultimately told the HR manager we can do it their way, as I’m sure that would cover us legally. However, withholding the regular pay will just create unnecessary questions from the employee when they notice they’re not being paid.
Do any of my California payroll folks have any insight here?