Do you know the rules governing the distribution of pay in your state?
Many states have established labor laws exist to protect workers who leave their jobs. These rules determine how soon an employer must distribute any unpaid compensation to workers. Generally, the timing hinges on how a worker’s tenure ended. Most states expect employers to expedite the payment of accrued wages when a worker is fired.
State laws vary significantly in how they address these protections, but only a few are silent on the matter.
California is the world’s fifth largest economy and the state with one of the most robust laws on final payment of outstanding wages.
In California, workers are entitled to receive all of their unpaid compensation at the end of their final day of work if they have given at least 72 hours notice. If the notice period was shorter than 72 hours, the employer has 72 hours after their last day of work.
The final paycheck must cover all funds due for accrued wages, unpaid time off, and unused vacation time.
In enacting Labor Code Section 203, California’s legislature instructed the California Department of Industrial Relations to impose a “waiting time penalty” when employers fail to honor the law in a timely fashion.
Employers must pay the average daily wage earned by the worker times the number of days the check is late. It doesn’t matter if the worker was only scheduled to work a portion of the elapsed time. The penalty clock keeps running.
In other words – imagine an employer owes a worker $400 on the last day, but it took the employer two weeks to send the final payment. If that worker typically earned $75 per day, then the employer would owe $400 for wages and $1,050 for the waiting time penalty.
Penalty funds are not considered to be taxable wage income and are not reported on a W-2.
Last paycheck laws for each state:
States that have not established clear laws on the timing of disbursements of final paychecks:
Alabama, Florida, Georgia
States where all workers, regardless of the reason for their departure, have to disburse a final paycheck no later than on the day of the next pay period:
Delaware, Idaho, Indiana, Iowa, Kansas, Maryland, Michigan, New Jersey, New York, North Carolina, Oklahoma, Pennsylvania, Rhode Island.
Alaska: Fired employees must receive their outstanding pay in seven days. If the employee quits, then the employer must pay at the end of the next pay period that begins three days after the employee’s last day.
Arizona: Fired workers: final check due on the next payday or within seven business days. Quit: the next payday.
Arkansas: Fired: seven days. Quit: the next payday.
Colorado: Fired – within six hours after the start of the next business day. Quit – next payday.
Connecticut: Fired: next business day. Quit – the next payday.
DC: Fired – check is due at the end of the next working day. Quit – within seven days or the next payday, whichever comes first.
Hawaii: Fired – the final paycheck is, with certain exceptions, due immediately. For those workers who quit without giving notice at least one pay period before their last day, funds are due on the next payday. For those who gave notice at least one pay period in advance, their outstanding pay is due on the last day of work.
Kentucky: All departing workers should receive their final check within 14 days or the next payday on the schedule, whichever comes first.
Louisiana: All departing workers should receive their final check within 15 days or the next payday on the schedule, whichever comes first.
Maine: All departing workers are due their outstanding pay on the next payday or within two weeks after employee requests pay, whichever comes first.
Massachusetts: Fired workers – outstanding pay is due immediately.
Minnesota: Fired workers – pay is due immediately. If the worker resigns, then the final check is due on the next payday unless the next payday is less than five days away, in which case the employer has until the next pay period or twenty days after the last day, whichever comes first.
Missouri: fired workers should receive their outstanding pay immediately. There are no rules for workers who resign.
Montana: Unless an employer establishes a different policy, a worker is due the entirety of his or her outstanding compensation on the day that they are fired. However, if the employer has a policy, the payment can be distributed as many as fifteen days after termination. If the employee quits, then final payment is due on the next payday or fifteen days later, whichever comes first.
Nebraska: All workers should receive their final pay by the next payday or within two weeks, whichever comes first.
Nevada: fired – payment due immediately. For workers who resign, the final paycheck is due on the next payday or within seven days, whichever comes first.
New Hampshire: Regardless of how they leave, employees should receive pay within 72 hours of termination, or on the next payday.
New Mexico: For fired workers, the final check is due five days after termination. If the worker resigns, then the final payment is due on the next regular payday.
North Dakota: If a worker is fired, the final payment is due no later than 15 days after termination or on the next payday, whichever comes first. If a worker resigns, the final check is due on the next payday.
Ohio: If an employee resigns, final payment is due on the 1st day of the next month for money earned in the first half of the prior month or on the 15th day for wages earned in the last half of the previous month. There is no law in place for the rights due to terminated employees.
Oregon: Final paycheck for fired employees is due by the end of the next working day. If an employee resigns and gives notice of their intent to do so at least 48 hours earlier, the final payment is due immediately. When an employee doesn’t give notice, he or she must receive the final check within five days or on the next payday, whichever comes first.
In 2016, Connecticut introduced a new law that established minimum standards for payroll cards. The law states a payroll card must offer at least three free ATM withdrawals per pay period. For all practical purposes, it also mandates that employees pay no fees to use their funds. As a result, many payroll card providers will not do business in Connecticut.