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Labor/Employment

Sep. 26, 2025

Why settlement allocation matters in California wage disputes

In employment settlements, overlooking how funds are allocated can derail a deal--addressing wage and non-wage components early is essential to avoid last-minute tax and reporting surprises.

Danielle A. Cruz

Senior Counsel
Gordon Rees Scully Mansukhani, LLP

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Why settlement allocation matters in California wage disputes
Shutterstock

Settlement negotiations often center around one key issue: the total amount. Once the parties reach an agreement on a number, it can feel like the matter is resolved, and you move forward with drafting the release. When handling employment matters, allocation of settlement funds for wage and non-wage compensation are often overlooked. Each carries specific tax withholding and reporting requirements that should be considered. A typical settlement may include several components...

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