When an employer terminates an employee, it can easily expose itself to liability by not issuing the final paycheck on time. Not surprisingly, this subject is heavily regulated by the states.
Sometimes companies hold on to the last paycheck until all company property is returned. Employers should NOT do this because it is often prohibited by law. Instead, the company should obtain written and signed acknowledgment from the employee that the final paycheck may be reduced by the value of the unreturned company property. The company can then issue the employee’s final paycheck and still be reimbursed for any unreturned company property.
Various states have different requirements for when the employee must receive his or her last paycheck. The current law in Maryland, Virginia and the District of Columbia is as follows:
Maryland and Virginia
Upon termination of employment, whether initiated by the employee or employer, the final paycheck must be paid on or before the next scheduled payday.
District of Columbia
Initiated by Employer: If the employer terminates the employment relationship, it must issue the final paycheck on the following working day. An exception is made if the employee is responsible for monies belonging to the employer. In that situation, the employer is allowed a period of four (4) days from the date of termination to determine the accuracy of the employee’s accounts, at the end of which time all wages earned by the employee must be paid.
Initiated by Employee: If an employee resigns then the employer must pay the final paycheck on or before the next regular payday or within seven (7) days from the date of resignation, whichever is earlier.
Naturally, if your company has any questions regarding this confusing subject, or on other aspects of dealing with employees, please feel free to contact me or one of our other experienced business attorneys.