Payment of Wages for Deceased Employees: How to Ensure Compliant Processing of Final Wages While Mourning a Colleague’s Passing

Last week’s legal update addressed the challenges California employers face when processing final payment of wages for separated employees, whether that separation is voluntary or involuntary. An even more challenging circumstance arises, from both an emotional and procedural standpoint, when an employee passes away and is owed wages.

Often times, employers are faced with confusion and uncertainty about what to do, and may encounter demands from multiple family members claiming to be the lawful recipient of those wages. While the law does not provide mechanisms to soften the emotional toll a workplace experiences upon a colleague’s passing, it does provide steps for employers to follow to ensure appropriate payment of wages to the beneficiaries or estate of the deceased employee.

California Probate Code sections 13600 through 13605 set forth procedures for payment of final wages where the deceased employee has a spouse or registered domestic partner. Specifically, an employee’s surviving spouse or registered domestic partner—or, as appropriate, the guardian or conservator of the estate of the surviving spouse or registered domestic partner—may, without procuring letters of administration or awaiting probate, collect a deceased employee’s wages up to a specific amount adjusted over time for inflation* by providing the employer with an affidavit or declaration signed under penalty of perjury containing all requirements set forth in California Probate Code sections 13601. The employer must require reasonable proof of the identity of the person submitting the affidavit or declaration before issuing payment.

If these requirements are satisfied, the employer must issue payment promptly and will thereafter be discharged from liability with respect to the compensation paid. The employer may rely in good faith on the statements in the affidavit or declaration and has no duty to inquire into the truth of any such statement. If the employer refuses to issue payment pursuant to these procedures, the surviving spouse or registered domestic partner may pursue the amount due through legal action and may recover reasonable attorneys’ fees and costs incurred in doing so.

If there is no spouse or registered domestic partner, California Probate Code sections 13100 through 13116 provide procedures for payment of a deceased employee’s final wages to other beneficiaries. Specifically, in certain circumstances where the value of the estate does not exceed a specific amount, adjusted over time for inflation,* personal property may be transferred using a Small Estate Affidavit or Affidavit for Collection of Personal Property. The Sacramento County Public Law Library has a template form for this purpose.

Where there is no spouse or registered domestic partner and no beneficiaries seeking payment pursuant to these provisions, wages can also be paid as requested by the executor of the estate. If no one claims the deceased employee’s wages, payment should be made to the California Labor Commissioner’s Unpaid Wage Fund.

In general, tax reporting of final wages paid to a deceased employee and his/her beneficiaries or estate depend upon the timing of the employee’s passing and the year in which payments are issued. Amounts paid to the employee prior to the employee’s passing that need to be reissued are typically issued in the employee’s name using a Form W-2 with all standard withholdings. Amounts paid to the employee’s beneficiaries or estate after the employee’s passing in the same year as that passing are typically paid using both a Form W-2 in the employee’s name (for social security, Medicare, and federal unemployment tax withholding) and a Form 1099-MISC in the beneficiary’s or estate’s name (for wages). Amounts paid to the employee’s beneficiaries or estate after the employee’s passing in the subsequent year are typically paid using only a Form 1099-MISC in the beneficiary’s or estate’s name (no social security, Medicare, and federal unemployment tax withholding). Employers should consult with a certified public accountant and/or tax attorney regarding tax withholding, reporting, and other tax-related obligations for guidance regarding each deceased employee’s specific circumstances.

Because an employee’s passing constitutes a qualifying event under COBRA, employers must also notify the plan administrator of a covered employee’s passing and must send a timely election notice to the employee’s qualified beneficiaries.

In addition to final payment of wages and notification of rights under COBRA, family members may seek information from employers regarding the deceased employee’s other benefits or other employment records. In most instances, applicable law and plan documents will dictate the beneficiaries of employee benefits (e.g., retirement and life insurance benefits, deferred compensation plans). In certain other instances, information regarding the deceased employee may be obtained through a Power of Attorney, Affidavit for Collection of Personal Property, or documentation establishing an individual as the personal representative of the deceased employee’s estate, such as an Order for Probate and/or a Letter of Administration.

Employers should consult with legal counsel for guidance regarding specific requests for a deceased employee’s final wages, benefits, information, or records.

* These amounts are scheduled to increase April 1, 2025.

This legal update and any use of its information does not create an attorney-client relationship. Nothing contained on this website should be considered legal advice for any specific employer or employment situation. Consult legal counsel before taking any action as a result of information contained herein.