Final paycheck laws dictate how much time an employer has to issue a final paycheck following an employee’s resignation or termination. In general, federal law does not require employers to issue final paychecks immediately. However, state statutes generally require employers to send out final paychecks on an employee’s last day or within a certain number of days after the employee leaves or is terminated.
How Final Paychecks Rules Apply
Federal labor law does not require employers to issue final paychecks immediately upon an employee’s resignation or termination. At a minimum, the federal Fair Labor and Standards Act (FLSA) requires former employees to receive payment on the next scheduled payday. However, most states have chosen to enact more rigorous final paycheck laws in order to protect their workforce. What’s more, some companies establish even more stringent standards as part of their internal policies.
Unfortunately, many employers are unaware of state requirements or don’t take the time to fully understand the mechanics and implications of the relevant laws. Plus, out-of-state employees are protected by their home state’s labor laws, so employers may need to follow different laws for different employees.
“Because final paycheck laws are so state-specific, business owners should hire HR professionals who are experienced in complying with relevant labor laws. If you don’t have a dedicated HR team and are facing an employee’s resignation or termination, always contact the relevant state’s labor department to determine when a final paycheck must be issued.” —Kiah Barrette Treece, Esq.
Former employees who do not receive their final paycheck in accordance with relevant laws can contact the U.S. Department of Labor’s Wage and Hour Division or their state’s labor department. Employers that fail to comply with final paycheck laws may be subject to penalties—including waiting time penalties, which require payment of a former employee’s average daily wages for each day of the employer’s delay.
Who Must Follow Final Paycheck Laws?
Most states have final paycheck laws that require employers to issue an employee’s final paycheck on a specific timeline—on their last day, within a certain period following their resignation or termination, or on the next scheduled payday. All employers must follow these laws for their in-state employees; employers must also follow the relevant final paycheck laws for their out-of-state employees—remote or otherwise.
Alternatively, some states (e.g., Alabama, Florida, Georgia, and Mississippi) do not have any statutes that address final paychecks. Employees in these states are protected by the FLSA, which allows employers to issue final paychecks on the next regular payroll day.
Final Paychecks During Layoffs and Other Employer-Initiated Terminations
In addition to variations in state requirements, final paycheck laws often differ depending on whether an employee resigns or is terminated. For this reason, it’s important to understand state requirements when deciding how to fire an employee. This is especially important in the wake of COVID-19, where over 30 million Americans have been laid off due to the virus and its impacts on the economy.
As a result of this incredible shift in US employment, a number of US employees have been furloughed—meaning they are temporarily laid off and can eventually return to their jobs. State law may treat furloughed employees differently for purposes of final paychecks, so it’s important that employers familiarize themselves with relevant requirements.
If you are terminating an employee and need to issue a final paycheck quickly, you can print payroll checks online for free. If you use a provider to do payroll, be sure to give enough processing time so that the check is cut in time; some will cut paychecks quicker for one-off situations.
Final Paycheck Laws by State
Final paycheck laws vary by state so it’s important to familiarize yourself with the relevant location-specific requirements. In general, however, states require payment on an employee’s last day, within a certain number of days following resignation or termination, or on the payday immediately following an employee’s last day.
To find out the final paycheck laws your business may be subject to, select the state in which you operate from the drop-down boxes below:
Some common approaches to final paycheck laws are summarized below—but you should always review your state’s relevant statute for precise requirements.
California Final Paychecks Laws
California employers are subject to some of the strictest final paycheck requirements. If an employee is fired, the employer must issue the final paycheck immediately upon termination—including accrued vacation. Employees who resign also receive their final paychecks soon after quitting. A California employee who quits should receive their final paycheck within 72 hours—or immediately if they gave at least 72 hours’ notice.
Texas Final Paycheck Laws
Texas has a mixed approach to final paycheck laws that depends on whether the employee resigns or is terminated. If an employee is fired, the employer must issue the final paycheck within six days of the termination. Alternatively, employees who resign must receive their final paycheck on the next scheduled payday.
New York Final Paycheck Laws
New York is one of several states where employers must issue a former employee’s final paycheck on the payday immediately following the employee’s last day. This is the case, regardless of whether the employee is fired or has quit. New York also imposes requirements on the payment of commissions—they must be paid within five business days after termination or within five days of the commissions becoming due (if they weren’t due at the time of termination).
Florida Final Paycheck Laws
Unlike most other states, Florida does not have a law that requires employers to issue final paychecks within a specific amount of time. Instead, former employees in Florida should expect to receive their final paycheck on the regular payday following their last day of work.
However, employers may not hold a former employee’s final paycheck to coerce them into signing any nondisclosure agreements or other documents. What’s more, if an employee requests their final check, the employer must issue it within 30 days of that request. If they do not receive it, the employee can then sue their former employer for collection.
Penalties for Not Cutting Final Paychecks on Time
If an employer fails to comply with payroll requirements, it could be subject to a number of financial or legal penalties. For example, in California, employers who fail to issue a final paycheck on time are subject to waiting time penalties. This means that, in addition to the outstanding paycheck, the employer must pay the former employee wages for each day the paycheck is late under state law.
An employer that fails to issue a final paycheck in a timely manner may also be sued by its former employee. However, this is less common because the amount of a final paycheck may not justify the cost of hiring an attorney. Employees who are owed back pay can also enforce final paycheck laws by contacting the Department of Labor’s Wage and Hour Division or their state’s labor department.
Bottom Line
It’s important for business owners to understand final paycheck laws to avoid penalties and limit the risk of lawsuits from former employees. While the FLSA imposes general final paycheck requirements, more stringent laws are imposed at the state level and vary depending on whether an employee resigns or is fired. What’s more, final paycheck laws depend on an employee’s location—not the employer’s—so you may need to familiarize yourself with multiple laws if you have out-of-state employees.
