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Laws Governing Final Paychecks

Posted by Eric Kingsley | Oct 17, 2014 | 0 Comments

Issuing Final Paychecks To Departing Employees

Many tasks must be handled properly when employment ends, especially the tasks related to the accurate and timely issuance of the employee's last paycheck. Companies operating without proper procedures, or those just unaware of the rules may dock final employee paychecks due to excess sick days, dress code violations, or missing property and equipment.

And while violations of company policy or the established code of conduct may warrant docking an employee's pay, a company is best served if it avoids undue hassle with a departing employee and remains professional throughout the entire termination process. Even when an involuntary departure is triggered by a rule violation or performance problem, the employer should  minimize the risk of legal liability, while not providing the departing individual with another reason to file an administrative claim or lawsuit.

Federal Law Governing Final Paychecks

The last paycheck should include compensation for all time worked. Best practices discourage extraordinary deductions from final paychecks, while the Fair Labor Standards Act (FLSA) prohibits such deductions from overtime pay. Additionally, nonexempt employees must be paid at least minimum wage for all regular hours worked.

Exempt employees' final paycheck should not reflect extra deductions for discipline, missing equipment,  or property violations. If an employee's last week is less than a full workweek, however, the FLSA allows organizations to prorate the final paycheck and cover only days worked.

Whether an employee is exempt or nonexempt, the FLSA does not require employers to immediately issue the final paycheck; rather, they may wait until the next regular payroll.

Importance Of State Law

Usually, federal law preempts state law. However, generally speaking, state law governs with wage-hour law when state law is more generous to employees. Thus, some states require immediate payment upon termination. From an employer perspective, California is one of the strictest states in the nation when it comes to final-payment rules as final checks must be given to the employee upon termination, or within 72 hours if the worker resigned. If an employee has given more than 72 hours' notice, the check must be presented on the last day of employment.

Violating state laws on final payments, even out of ignorance, can be costly for employers. In some states, if an employer fails to pay a departing worker within the legal time requirements, it may have to pay additional penalties and interest, along with any attorney fees and legal costs the employee incurred in seeking payment.

Vacation Time And Sick Pay

The Fair Labor Standards Act (FLSA) does not determine whether unused vacation time or sick leave should be included in the final paycheck. Once again, state law governs and in California, accrued paid time off is considered part of earned compensation and must be included in a last payment. In states where an employer is able to set its own rules, an employee handbook is an ideal place to specify whether unused vacation time or sick pay is earned and payable to exiting employees. Legalistic distinctions based on “for cause” terminations are ill-advised. Remember, employers should remain as gracious as possible and are advised not act in a manner that may cause controversy.

For Assistance And Support

For more information, visit the California Department of Industrial Relations‘ website or contact the experienced employment attorneys at Kingsley & Kingsley with specific questions or concerns. Furthermore, if you believe that you have been denied certain wages, or unfairly received a late paycheck, an experienced employment lawyer may be able to help. If you have questions or concerns about your rights, contact the experienced employment lawyers at Kingsley & Kingsley by calling us at (818) 990-8300 or by clicking here to contact us via email.

About the Author

Eric Kingsley

In practice since 1996, the firm's lawyer and co-founder, Eric B. Kingsley, has litigated complex cases and written numerous appeals in state and federal courts on behalf of the California law firm Kingsley & Kingsley, including More than 150 collective actions. Mr. Kingsley focuses his practice ...


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