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Labor Code section 201(a) requires that an employer immediately pay all wages earned and unpaid at the time of termination. If the employer willfully fails to pay the wages that are due, the wages of the employee shall continue as a penalty until paid, up to a maximum of 30 days. If there is a dispute over the wages that are owed, the employer must pay, without condition, all wages which the employer concedes is owed.

Often, when an employee is terminated or laid-off, the employer will ask that the employee sign a release. The practice is legal and often times protects the employer down the road, should litigation ever arise. However, employers need to beware - asking for such a release can be a problem.

Labor Code section 206.5 states that an employer may not require that an employee enter into any release of any claim or right, unless payment of all wages has been made. Any release entered into in violation of this section is void. Effectively, this means that an employer cannot condition the payment of wages on the signing of a release. If a severance or other consideration is given to the employee in exchange for a release, that release is only valid if all wages have been paid. Employers should also be aware that "wages" may also include the payment of stock options and other employee benefits. Further, an employer may be charged with a misdemeanor for violation of Labor Code section 206.5.

Certainly, it makes good sense for any employer to try and prevent a future lawsuit by having the terminated employee execute a release. However, if you are going to do so, make sure that all wages have been paid and that there is some other consideration given for the release.