Obeying Final Paycheck Rules: A State-by-State Guide
Whether an employee quits, is laid off, or is fired, employers are left with a lot to contend with, and one of the most important things to get right is the final paycheck. Issuing final wages correctly and on time not only keeps you compliant with laws and regulations but can help you avoid unwanted legal action, potentially leading to much bigger problems.
Emotions are often running high when an employee leaves. If they insist on immediate payment of their final paycheck, do you know how to comply with state laws and regulations, as well as company policy?
While most states have laws regulating the final paycheck, not all do, and there are no federal laws or regulations on when you must issue an employee with their final paycheck. Under the Fair Labor Standards Act (FLSA), employers can issue the final paycheck at the next regular payroll. The next regular payroll is whenever your company normally pays employees; weekly, biweekly, monthly, and so on.
Generally, states follow one of two approaches to issuing a final paycheck: provide it immediately, or at the next pay period. Note that when states require that you pay sooner than the FLSA, you must follow state law.
The FLSA doesn’t offer guidance on whether unused benefits should be included in the final paycheck, but be aware that each state may have regulations on this. To ensure compliance, review any unused benefits, the manner of payment, and if you have the right to deduct negative vacation time to confirm that the last paycheck is right.
If you have employees in a state that doesn’t have laws regarding the final paycheck, like Georgia, ensure you have a company policy that covers how and when the final paycheck will be issued. Document it in writing and communicate it to employees via your handbook, and most importantly, follow it every time.
Every state has its own specific rules regarding an employee's final paycheck. It's essential to familiarize yourself with how the states your employees reside in handle this area of law. Remember that state laws change frequently, employment agreements may revise default rules in a state (in some instances), and court cases can also have an influence on state laws.
To give employers a head start, we’ve created this handy chart of state laws that outlines when a final paycheck must be issued. Always double-check with your state’s department of labor before acting, to ensure you’re not caught out by changing laws.