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What Are Final Paycheck Laws?
While federal law doesn’t require the immediate payment of a final paycheck, some states have very specific timelines for payment of final wages to employees. Employers that understand the requirements in the states where they have employees will avoid penalties, interest, and legal costs by paying their departing employees correctly.
Final paycheck laws vary from state to state, and depend on the circumstances in which an employee leaves the company. If an employee quits voluntarily, the employer typically has more time to pay the final check than if the employee is laid off or terminated.
What Is Included on a Final Paycheck?
State laws dictate what needs to be included on a final check (besides pay for time worked). Some states require all accrued vacation pay to be paid on the final check; others only require accrued vacation payouts if the employee has given proper notice. Some states require that any payments owed to the employee other than wages, such as bonuses and commissions, must also be included on the final check. Severance payments may also need to be included on the final check, depending on the terms of the specific severance agreement.
Are Deductions Permitted on a Final Paycheck?
State laws are specific about what types of deductions can be made on a final employee paycheck. Voluntary deductions, such as health insurance premiums and retirement plan contributions, will depend on company policy. Deductions such as withholding taxes and garnishments are mandatory.
In some states, employers may not withhold a final check or deduct amounts owed for unreturned company property or payroll advances still owing. To learn the best practice for recovering amounts due to the employer by the employee, consult with your state labor department.
Who Has to Follow Final Paycheck Laws?
All good things come to an end, so it’s to be expected that employees will be moving on at some point. All U.S. employers have an obligation to comply with final paycheck laws in states where the laws are specific on the payout timeline. Additionally, special consideration must be given when companies close their doors or have a widespread layoff.
Final Paycheck Laws During Layoffs. Layoffs pose a special challenge for employers because there are many considerations involved in determining who will be laid off. Employers must be careful that their decisions don’t adversely impact protected employee groups, and mindful of federal and state Worker Adjustment and Retraining Notification Act (WARN) requirements that provide for advance notice of the layoff (or additional penalties for failure to provide such advance notice). The timing of final paychecks for laid-off employees is typically the same as for other involuntarily terminated employees, as long as WARN Act requirements are met.
Final Paycheck Laws By State
Because state laws vary, here is a representative sample of the various state laws. Keep in mind that state laws change frequently and this summary isn’t to be construed as legal advice. We recommend checking state statutes for current information.
- Alabama, Arkansas, Florida, Georgia, Mississippi, and Ohio. These states have no laws governing the timing of final paychecks for terminated employees. Except for Ohio, the other five states have no laws governing the timing of final paychecks for employees who quit voluntarily. Arkansas has an exception for railroad employees.
- Delaware, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Michigan, Nebraska, New Jersey, New York, North Carolina, North Dakota, Oklahoma, Pennsylvania, Rhode Island, Tennessee, Virginia, and Washington. These states typically allow employers to wait for the next scheduled payday to give final checks to employees, whether voluntarily terminated or not. Specific statute language makes exceptions if the next payday is longer than ten or fifteen days away, and if an employee requests the check sooner.
- Connecticut, District of Columbia, Oregon, and Utah. The final paycheck for terminated employees must be given on the next business day in these states. They have varying requirements for final paychecks if the employee quits voluntarily.
- California, Hawaii, Massachusetts, Minnesota, Missouri, Montana, and Nevada. The final paycheck for terminated employees in these states must be given immediately (at time of termination). These states have varying requirements for final paychecks if the employee quits voluntarily.
As this list indicates, most states are very specific about the timing of final paychecks for employees, whether they quit voluntarily or not. This highlights the necessity of having clear company policies and training management personnel on these policies so employees can be paid correctly and on time.
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Carol Eliason Nibley
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