The Last Paycheck – When Do Terminated Employees Need to Be Paid?
The exact date at which employees need to receive their final paycheck upon termination is a mystery to many small business owners. The fact that there are laws surrounding the issue at all vexes many who are responsible for paying employees. And it’s not surprising. State laws are complicated and the Fed has no laws about it at all. In the words of the Department of Labor,
“Employers are not required by federal law to give former employees their final paycheck immediately. Some states, however, may require immediate payment.”
What exactly is meant by immediate payment, you ask? It depends on the state. Some states require payment be made immediately, some within 2 days, 1 day, or just on the next normal payday. Beyond that, the rules depend on whether the employee was fired or quit. Here is a list of each state’s last paycheck requirements for reference.
It is a good idea to be familiar with the laws in your state because if you aren’t and you delay the final pay check, you might face penalties or even lawsuits for violations. Either eventuality can be pretty costly.
In addition to these final paycheck laws, many states also require that employers payout unused vacation time on that final paycheck. For example, in California, vacation time is considered wages, so any unused vacation time must be paid as wages on that final paycheck.