How do I terminate a California based employee in Justworks?
From the Employee’s profile, click “terminate” in the top right corner. You’ll then be prompted with a screen that asks for last day of employment, termination type (voluntary or in-voluntary), and reason. This helps Justworks complete the required unemployment forms.
Next, you’ll be presented with Wages Owed for the employee’s last pay period which is calculated using the final day of employment. You can then enter Additional Wages Owed (bonuses/commission), the employee’s remaining unused PTO Balance, as well as the final Payment Date (Penalty for Late Payment). Be advised, according to the California Department of Industrial Relations, you can be assessed a waiting time penalty of a day's wages for each day the wages remain unpaid, for up to 30 calendar days.
Expense Reimbursements and/or Severance should be paid separately as off-cycle payments.
We'll then show you the last paycheck calculations including both the gross and net amounts. The net amount is what needs to be paid to the employee on their last day by paper check. Justworks will handle the tax payments like any other taxable payment.
Laws in California require that employees be paid their owed wages at the time of termination. Unless an employee resigns with less than 72 hours' notice, the final pay is always due at the time of separation, no matter what. If an employee resigns with less than 72 hours' notice, the employer has 72 hours (including weekends) to pay the employee their final paycheck. This means that if an employer chooses to let an employee go, or if the employee provides the employer with more than 72 hours notice, the employer is responsible for paying the employee all due wages at the time of termination by paper check. Final pay may be paid via direct deposit only if the employee has voluntarily authorized (in writing) such deposit, and the customer has enough advanced notice of the termination of employment or resignation to allow for processing of a direct deposit final paycheck to be deposited on the employee's last day of work.
The place of the final wage payment for employees who are terminated (or laid off) is the place of termination. The place of final wage payment for employees who quit without giving 72 hours prior notice and who do not request that their final wages be mailed to them at a designated address, is at the office of the employer within the county in which the work was performed.
The implications of this law are that if the employer is currently employing someone in California and the relationship is terminated, the employer will either have to collect written consent allowing them to pay by direct deposit while still adhering to the required timelines for issuance of final pay, or the employer will have to cut a paper check on the employee’s last day and timely report the payment to Justworks so that the payment is recorded for tax purposes and a corresponding wage statement is issued.
Employers are also required to pay out any accrued unused vacation. All vested vacation must be paid to the employee as wages at the final rate.
Under Justworks current process, if an employer selects "Schedule Termination" for an employee in California, Justworks has a hold that asks them to call our support line. This process allows us to walk you through the procedures of terminating someone in California.
Additionally, the following forms are required to be presented to all exiting employees regardless of the reason for leaving:
- DE2320 Form: For your benefit - Unemployment Insurance (http://www.edd.ca.gov/pdf_pub_ctr/de2320.pdf)
- Health Insurance Premium (HIPP) Notice (if applicable, if health benefits are offered): (http://www.dhcs.ca.gov/services/Documents/HIPP%20DHCS%209061%20ENGLISH%20(Notice%20to%20Terminating%20Employees)%20Revised%2001-14.pdf)
- Notice to Employee as to Change in Relationship: (http://www.edd.ca.gov/payroll_taxes/pdf/NoticetoEmployeeastoChangeinRelationship.pdf)
Justworks currently automatically adds these documents to the employee's documents. However, the employer should feel free to print a copy and give to the employee if that is preferred.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.