One of the hundreds of unique compliance items we monitor on behalf of our members is the final paycheck rules in your state. They vary widely, however the one absolute commonality is that you can never withhold a final paycheck for any reason.
Some states simply allow you to provide the final paycheck in the course of your regular payroll schedule. However, many require that you provide the final paycheck sooner, sometimes even at the time of the termination meeting. Regardless of your state’s final paycheck rules, withholding any paycheck beyond the next regular payroll date is a violation of federal law.
In many instances, if you fail to comply with your state’s final pay requirements (regardless of your reasons) you are giving a parting gift to your ex-employee. That is because often, the statutes grant them an automatic penalty reward against you for not meeting your obligations under the final paycheck rules in your state. Penalties can include doubling the amount you owe them and legal fees for having an attorney send you a letter!
In all instances, failing to pay an employee their final paycheck on time via withholding is a federal wage violation. In 15 years of providing thousands of answers to final paycheck questions, we have NEVER advised a member to hold the last paycheck as a method for obtaining anything, whether it be a resignation letter or property that belongs to the practice.
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The common forms of this question you all ask us are:
Question #1: I have an employee who is resigning, and they are ignoring my requests that they put it in writing or sign the letter I gave them. I would like to withhold their final check if they do not sign my letter.
Question #2: I have an employee who has my property, and I want to hold their final check until I get my property back. (It’s usually uniforms, a laptop/phone situation, or perhaps a key to the office.)
Let’s tackle the first question…
As we explained, it’s a federal Wage and Hour violation under the FLSA not to release final paychecks. And many states require the final check to be issued sooner. So regardless of your reason, as soon as you fail that test, you are instantly vulnerable. Some states even make willfully failing to pay wages properly a misdemeanor! Communication from you threatening their final paycheck would be strong evidence of wilfulness.
As far as demanding that they put their resignation in writing or sign something coming from you, those requests can create or increase a strain in your relationship. It can also completely backfire on you. Something we, as HR professionals, need to know about is what coercion is and how it can work against us. When it comes to proceedings like unemployment hearings, where you need to introduce something like a resignation letter, the easiest way for the employee to fight you is for them to say that they were coerced into signing or writing that document. Saying you hounded them about the letter, or threatened their paycheck, is reason enough for the Unemployment judge to toss that letter out the window as meaningless.
The employee isn’t required to put anything about their resignation in writing to you, but it is critically important that you have properly documented the resignation. You want this in your records as proof that the person voluntarily chose to leave. That documentation is what you will send to the Unemployment office if the employee applies for benefits. But again, don’t try to force the employee to write or sign something for you.
Ok, so we said you need documentation but we are also saying not to push the employee to provide it. So what should you do? Work with CEDR to document the resignation on your end. CEDR members can contact our Solution Center to discuss the details of the resignation with one of our HR experts. From there, we draft a letter confirming your acceptance of their voluntary resignation.
This letter will provide factual information about their reason for resigning, their last day, etc. Again, no need to ask the employee to sign this. If they separate from employment and didn’t take any action to object to anything in the letter, then it’s typically seen as an accurate snapshot around why the separation happened, and is incredibly useful to you when it comes to things like Unemployment claims.
Also note that by YOU being the one to document the resignation, you get to control what it says. Hounding someone who already has their foot out the door to write you something could result in them putting some not so kind words into writing.
On the second question…
Once again, the wage and hour laws absolutely prevent you from withholding a check to get the return of your property. That is still true EVEN if they agreed to it on some kind of form! Keep in mind, employees cannot release you from your legal obligations in any way, so even having them sign something agreeing to this type of withholding will not protect you. If an employee has property, there are other steps that you can take, but you should not convert a final paycheck into leverage for the return of the property.
Never withhold a final paycheck
Because of wage and hour laws, the act of withholding or threatening to withhold an employee’s final paycheck is never a good idea. If you need to get your company property back, enlist the help of an HR expert or seek out legal counsel. If you can’t get a resignation letter out of the employee, you can work with our HR Solution Center to document that employee exit in a way that protects you. But, whatever you do, don’t withhold that final paycheck!
