The manager you hired a year ago sends you a text resigning at the end of the business day, leaving a letter of resignation on your desk. Surprised, you reach out to the employee, via text, to discuss the matter as well as close the loop on a few outstanding issues. No response. Additionally, the employee doesn’t return your phone calls. Now what? The employee has a phone and laptop which are company property. In his resignation letter he is requesting that two weeks of unpaid vacation be paid in his final paycheck.
Holding the Final Check Or Unauthorized Deductions
As frustrating as the situation may be, the employer cannot hold the terminated employee’s paycheck until the equipment is returned. Why? The FLSA mandates that wages are due on the next, regular payday for the covered pay period. Additionally, several states have clear provisions for when an employee must receive payment upon termination. Neither federal or state laws allow for any exceptions related to un-returned equipment.
An employer might be able, however, to deduct the cost of the equipment from the final pay of non-exempt employees, depending on state law. Specific circumstances and state wage deduction laws determine whether or not an employer can do this. Caution! To be safe, do NOT take any deductions from a final check unless you have a voluntary, employee signed, specific deduction authorization on file that clearly demonstrates the employee or ex-employee knew about the deduction in advance and agreed to it – a specific dollar amount on a specific day.
In general, state wage deduction laws allow employers to deduct monies from an employee’s pay required by law, benefit deductions, or deductions ordered by a collective bargaining agreement or court. In some states, wage deductions laws will allow an employer to make other deductions only if the employer has written authorization from the employee. If the employee works in a state that does not prohibit this type of deduction, then the employer can withhold the cost of the item from the employee’s pay with written authorization. However, there are some states, like California, that have additional restriction that the employer must follow, even with written employee authorization.
What About Paying Out Unused Vacation Pay?
Vacation pay is included in the definition of “wages” in a state’s wage and hour laws. Regardless of an employee’s reason for separation, accrued vacation is normally paid to an employee when leaving the company. In fact, some companies may also pay terminating employees prorated vacation pay for any vacation time that they would have earned during the next year, provided they’ve met all of the necessary eligibility requirements under the employer’s policy.
Ensuring compliance to state laws on payment of finals wages is advisable to avoid unnecessary penalties. An employer may place certain restrictions on vacation pay rights, however, in California, Massachusetts, and Illinois, state law provisions require an employer to pay any accrued vacation pay upon termination of employment with the company.
There are many other wage and hour violations that catch employers off guard:
He’s salaried, why do I owe Overtime?
Remember that the FLSA does not require that nonexempt employees be paid hourly. Nonexempt employees may be paid by means of a salary and are still entitled to FLSA overtime pay if, when, and to the extent that they actually work more than 40 hours in a week. FLSA overtime pay is time and one-half of the employee’s regular rate of pay.
But they were on break!
A lumber company automatically deducts one-half hour for meal breaks each shift. Upon hiring, the employer notifies employees of the policy and of their responsibility to take a meal break. An hourly paid office worker at the company clocks out for lunch, but ends up eating at her desk while finishing up a project. Does this practice comply with Wage and Hour? No, the employer must ensure that the employees are receiving the full meal break.
What do you mean everyone in the carpool has to be paid for the commute?
Employees must be paid for all working time, which is further defined by the U.S. Supreme Court regulations that describe various activities as counting as hours worked. These categories included certain preparatory and concluding activities, time spent in traveling for the employer, and time spent waiting for instructions…or even sleeping! An example of paid travel time would be a foreman who daily carpools with employees, to from the day’s job site, using the car time to discuss the schedule for the day, feedback on the prior day, spends the time giving direction and performance conversations, etc.
It’s enough to make your head spin, but you don’t have to go it alone. Learn more to help move your business, view our HR Quick Reference Guides.