Unless you’re Donald Trump, you probably don’t like telling employees, “You’re Fired!” On the other hand, most employers do not like to hear that an employee is quitting. However, eventually the day will come when an employee leaves, and will be asking about his or her final paycheck. Many managers view the final paycheck as their last chance to get property back, or paperwork filled out. They often make this decision based on what they “feel” is fair and reasonable. Unfortunately, no matter how fair or reasonable their decision may seem, it must comply with state and federal law.
Under federal law, employers are not required to give former employees their final paycheck immediately. However, employers beware – nearly every state has a statute that addresses the legal requirements surrounding an employee’s final paycheck. Employers must ensure that their managing employees are current with their respective state’s “final paycheck” laws in order to avoid potential liability, and inevitable trouble with state and federal departments of labor. Absent unavoidable circumstances, courts universally hold employers strictly liable for any violation, whether done unintentionally or with what they believe to be good cause. A violation of these laws can expose an employer to substantial fines, and in some states, criminal charges.
In the majority of states with final paycheck statutes, an employer must deliver the final paycheck to an employee who has been terminated before the next payday. In a number of states, including Massachusetts, Connecticut, and Washington D.C., the final paycheck must be delivered the day of termination, or the next business day. In most states that require the delivery “at once,” (i.e. before the employee leaves the building), if it is impossible to retrieve the paycheck, it must be delivered the next business day. However, some major employment markets, such as New York and New Jersey, allow the employer to deliver the final paycheck on the next payday.
State statutes that address final paycheck requirements when an employee resigns tend to be a bit more lenient than their termination counterparts. In the majority of states, an employer that delivers the final paycheck by the next payday will be abiding by the law.
Attention to Detail
Although the majority of states’ deadlines fit within inherent business timelines (i.e. “next business day,” “next payday,” “at once”), others prescribe an arbitrary number of days (i.e. NH – “three days”). If an employer in one of these states thought the next payday was acceptable, it could be in violation of the statute by ten or more days. Most states also have subsections that prescribe different timelines during union strikes or pending arbitration.
Almost every state statute includes a fine that correlates to the daily earning of the employee, multiplied by the number of days that employer is in violation of the statute. Some states then double or triple this number, and others tack on additional monetary fines. These fines can end up ranging from a few hundred dollars to tens of thousands for an employer. In addition to fines, in some states (Connecticut, for example), the employer could be charged with a class D felony, or potentially face up to one year in prison.
Employers that do not have strategies in place to ensure that their managers and HR departments are current with their respective state laws should begin planning today.