Penalties for Employers Writing Bad Payroll Checks
- Employers who pass bad checks may suffer penalties under state civil and labor codes.check and pen in close up image by Alexey Klementiev from Fotolia.com
A check is an instrument of payment presented to another party in exchange for goods and services. Bad checks occur when the instrument fails to clear the bank for payment. Employers who pay their employees bad checks for wages may suffer penalties under state labor codes. Passing a bad check can also carry civil code penalties. - Bad checks can occur for several reasons: a banking account may have been closed, lack of funds, banking errors, or payment on a check may have been stopped. Employers who are notified, or who are aware a check has not cleared for an employee, should investigate the matter immediately.
- State labor codes may allow employees to file wage claims against employers for unpaid wages due to bad checks. Wage claims are presented to state or municipal labor agencies for investigation and payment of unpaid wages. Some states, such as California, impose a waiting-period penalty on employers. This is a penalty fee applicable to employer checks returned or unpaid as a result of insufficient funds. The fee is set at the rate of pay the employee was receiving at the time of the bounced check and multiplied by the number of days he's had to wait for payment. If an employer can show the bad check violation was unintentional, the waiting-period penalty may be waived.
- A civil code penalty may apply to employers who write bad payroll checks. This allows recipients of bad checks to recover additional fees. Civil code violations may be brought before small claims courts, depending on the dollar amount of the violation. California Civil Code section 1719 allows the recipient of a bad check to recover up to three times the value of the check, or up to $1,500. The employee may also be able to recover court and mailing costs. Claims under $5,000 in value can be brought before a California small claims court.
