California Resignation Law: Final Paycheck, PTO, Non-Compete

Final paycheck: Labor Code section 202

California Labor Code section 202 splits the final paycheck rule based on notice:

• 72 hours or more of notice: final paycheck is due on the last day of work. The employer must pay everything owed (wages, accrued vacation, commissions due) when you walk out the door.
• Less than 72 hours of notice: final paycheck is due within 72 hours of you giving notice.

If the employer pays late, the waiting-time penalty in Labor Code section 203 kicks in: your daily wage for every day of delay, up to 30 days. This is meaningful money. A worker earning $250 a day who waits 30 days for the final paycheck is owed $7,500 in waiting-time penalties on top of the wages. The penalty is automatic if the delay is shown to be wilful.

PTO payout: Labor Code section 227.3

Labor Code section 227.3 treats accrued vacation as wages. The California Supreme Court confirmed this in Suastez v Plastic Dress-Up Co (1982): vacation is earned wage compensation that vests as it accrues. Employers cannot have a use-it-or-lose-it policy in California. They can cap accrual at a reasonable multiple of annual entitlement (typically 1.5x or 2x), but they cannot zero out accrued vacation.

On separation, accrued unused vacation is paid at the final regular rate of pay. PTO that bundles vacation and sick is treated the same way for the vacation portion. Pure sick leave (where tracked separately) is not required to be paid out under section 227.3 but may be required by city or local ordinance.

Non-compete: Business and Professions Code section 16600

California Business and Professions Code section 16600 voids any contract that restrains a person from engaging in a lawful profession, trade, or business. Non-competes are unenforceable in California against employees, with extremely narrow statutory exceptions (sale of a business, dissolution of a partnership, dissolution of an LLC). Edwards v Arthur Andersen LLP (2008) confirmed there is no reasonable-non-compete carve-out either.

Senate Bill 699 (2024) extended this further, making it unlawful for an employer to even include a non-compete clause in a California employment agreement and requiring affected employers to send notice to current and former employees that any clause was void. AB 1076 made this explicit and added a notice requirement.

Non-solicit clauses (of customers, of employees) are also generally unenforceable in California after AMN Healthcare v Aya Healthcare Services (2018). Trade-secret protection survives (the Uniform Trade Secrets Act applies), and confidentiality obligations on actual trade secrets remain enforceable.

Unemployment after voluntary quit

Voluntary resignation usually disqualifies you from California unemployment insurance (administered by the Employment Development Department, EDD). The exception is "good cause attributable to the employer," which California has interpreted broadly relative to other states. Examples accepted as good cause include a material reduction in pay or hours, a material change in job duties, a substantial relocation forced by the employer, and a genuine constructive-discharge situation (harassment, unsafe conditions).

File the claim with EDD. If denied, appeal within 30 days. The appeal hearing before an administrative law judge often turns on documented evidence (emails, dated pay records) of the conditions that prompted the resignation.

Practical California exit checklist

• Give 72+ hours of notice to trigger the "final paycheck due on last day" rule under section 202.
• Confirm with payroll that accrued vacation and commissions due are calculated for the last-day payout.
• If your employment agreement has any non-compete or non-solicit language, you are not bound by it in California; SB 699 says so explicitly.
• Do not take trade secrets, customer lists, or proprietary documents. Section 16600 protects mobility; the Uniform Trade Secrets Act protects employer information.