The federal Fair Labor Standards Act (FLSA) mandates many standards for employee pay, including requirements for minimum wage, overtime pay, and employing youth. These laws provide consistent rules for private companies that operate in multiple states, and for federal, state, and local governments.
Yet the FLSA doesn’t cover one inevitable aspect of the payroll process: final pay for an employee who quit or was fired. A requirement for that final pay is determined by each state, making it imperative that employers know what their state stipulates. Employers can be fined if these payments are not made as required.
While some states have the same requirement for all departing employees (Virginia and Maryland, for example, require that all employees who leave be paid by the next scheduled payday), other states have different due dates for the final pay. In DC, fired employees must be paid by the next working day while those who resign need to be paid on the next pay date or within seven days of their resignation, whichever is earlier.
In all cases, an employee’s final paycheck should include wages earned in the most recent pay period as well as other earned and accrued compensation. This includes bonuses, commissions, and accrued vacation or PTO (personal time off). An employer may only withhold money from a final paycheck if the employee owes the company money (such as from a salary advance) and has the employee’s written approval to do so.
Like with most employment practices, a company’s policy for final payment should be in writing and made available to all employees. This will help to avoid any uncertainty, confusion or misunderstanding when an employee leaves the company, as well as any fines for not meeting the required deadlines.
The professionals at Dembo Jones can be an experienced resource as you develop your compensation policies. Let us help you create policies that meet your state’s requirements.