Because employers and employees have the right to reach agreement as to the terms, conditions and nature of the work, many employers believe that anything they can get an employee to agree to is legal and permissible. This notion can lead an employer into a violation of law. Some obligations, however, such as the obligation to pay overtime to non-exempt workers, the provision of worker’s compensation, and the obligation to provide a safe work environment (to name just a few) cannot be bargained away. An employee’s agreement to surrender these statutory protections is void, and can also constitute a violation of criminal law.
An employee’s right to receive earned wages also belongs on this list. Once earned, wages are held in trust by the employer until paid to the employee. Employers may not treat an unpaid wage as their own property. They cannot require an employee to surrender his or her claim to it, nor can the employer (except in a few statutorily defined exceptions) deduct from it, attach it, or otherwise treat it as their own property. In general terms, all an employer can do with an unpaid wage is pay it. In fact, it is a crime for an employer to require an employee to execute a release of earned wages, and all such releases are invalid.
So, do you know what constitutes an impermissible release? Well, a document that says: “I release any and all claims to the wages I earned,” is pretty clearly prohibited, but what about a time record? In 2009, the statute prohibiting wage releases was amended so as to render void (and to make a misdemeanor) efforts by an employer to have an employee execute or ratify time records which the employer knows to be false. Employers in California should exercise real care to ensure that disputes over what time was worked (and consequently, what wages are due) are not resolved solely at the employer’s insistence. Wage disputes resolved in that way may set the employer up for a claim that it has violated the law.
As a practical matter, employees and employers compromise and resolve disputes over wages due all the time. These compromises and resolutions sometimes occur with the aid of the Labor Commissioner or the Courts but are often resolved outside of these administrative or legal proceedings. Bona fide disputes over wages due can be resolved by compromise, but it is important that documents reflecting that resolution demonstrate a lawful compromise and not an illegal release.
Labor Code section 206.5 states:
(a) An employer should not require the execution of a release of a claim or right on account of wages due, or to become due, or made as an advance on wages to be earned, unless payment of those wages has been made. A release required or executed in violation of the provisions of this section shall be null and void is between the employer and the employee. Violation of this section by the employer is a misdemeanor.
(b) For purposes of this section, “execution of a release” includes requiring an employee, as a condition of being paid, to execute a statement of the hours he or she worked during a pay period which the employer knows to be false.