Last Updated on April 26, 2023 / Benefits & Compensation
We recently had an employee terminate his employment without giving any notice. He requested to receive his final paycheck immediately rather than waiting for the next payday. Do we have to comply?
The United States Department of Labor does not require that you pay an employee immediately upon separation, but instead, it refers individuals to their State Labor Department for direction and guidance. The federal law remains silent on when final paychecks must be distributed, but the majority of states have statutes dictating when employers have to hand over a final paycheck to a departing employee. Some states go even further by defining when a check must be released based on the reason for departure – termination for cause or resignation.
Final Paycheck Timelines
The majority of states fall into similar patterns when defining final paycheck timelines. It could be immediately, within 24 hours (regardless of the reason for termination), within two weeks, or even on the next scheduled payday. For those in the regional tri-state area, it is important to understand the distribution timelines and requirements for Ohio, Kentucky, and Indiana, as not one is the same.
- Ohio: Whichever is first: either the next scheduled payday or within 15 days.
- Kentucky: Whichever is later: either the next scheduled payday or within 14 days.
- Indiana: The next scheduled payday.
For those working in other states, check out Paycor’s chart of State requirements to determine when the paychecks must be released.
Final Wages and Deductions
State laws also dictate what is included in the final wages. For example, in California and Montana, employers must pay for all hours worked in addition to accrued paid time off. In Ohio, accrued paid time off does not have to be paid unless your company policy indicates that unused time will be paid at termination.
Deductions in the final paycheck must also be carefully determined to assure compliance with state law. Trying to recoup a loan payment or an advance of time off may be illegal depending upon the state you are in. For example, in California, employers cannot make any deductions from the final paycheck other than the “normal” deductions. Other states dictate that deductions may be made as long as a written agreement is in place regarding final payment.
How to handle outstanding company property may be another consideration. For example, South Dakota includes the requirement that employees are required to return all company property before their final paycheck can be released. Is this legal? Depends on your state! Check with your state’s labor law resource page to determine what you can and cannot do for final payments in your state.
Although final paycheck laws vary from state to state, it is important to remember that regardless of state law, employees must be paid for all hours that they have worked in their final pay. There is no negotiation on this requirement, regardless of the reason for the employee’s departure. Finally, even though federal law does not address the specifics surrounding final pay, they do advise that if an employee is not paid within their next regularly scheduled paycheck date for their hours worked, they should contact the Department of Labor to file a complaint under the Fair Labor Standards Act. So regardless of your state law, be sure to properly pay and communicate to employees when to expect their final paycheck to avoid a complaint.
Special thanks to Paula Alexander, MA, PHR, SHRM-CP, and Patti Dunham, MBA, MA, SPHR, SHRM-SCP, for contributing to this edition of our HR Question of the Week!
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