Introduction
Employers are not bound by any federal laws to issue an employee’s final paycheck by a certain date. Instead, each state has the discretion to determine its own final paycheck rules, with most states adopting separate final paycheck time limits for employees who are terminated and employees who quit. Generally speaking, employees who are terminated (fired or laid off) are required to receive their paychecks much sooner than employees who voluntarily quit.
Final Paycheck Requirements for Employees Who are Terminated
There are 8 states that require the employer to issue a terminated employee their final paycheck immediately—California, Colorado, Hawaii, Massachusetts, Minnesota, Missouri, Montana (with some exceptions), and Nevada. On the opposite end of the spectrum, there are 27 states that allow employers to wait until the next scheduled payday—Delaware, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Michigan, Nebraska, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Dakota, Tennessee, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.
Outside of the 4 states that don’t have any applicable statutes (Alabama, Florida, Georgia, and Mississippi), the remaining 11 states require the employer to issue a terminated employee their final paycheck within 1 – 15 days (unless the next scheduled payday is sooner, in which case the final paycheck is due on that date).
In Arizona, employers are required to pay a terminated employee their final paycheck within 7 working days or by the next payday, whichever is sooner (ARS 23-353). Failure to issue the final paycheck in a timely manner is considered a petty offense.
Final Paycheck Requirements for Employees Who Quit
Employees who quit should still receive their final paycheck in a timely manner, but the majority of states have more relaxed requirements on this matter. In fact, only 10 states require payment sooner than the next payday—California, Hawaii, Idaho, Louisiana, Montana, Nebraska, Nevada, New Hampshire, Oregon, South Carolina.
In Arizona, employers are permitted to issue a final paycheck to an employee who has quit on the next payday. However, while the deadline is more relaxed in this case, failure to issue the final paycheck on time is still considered a petty offense and the employee can a claim or lawsuit against the employer.
Final paycheck withholding restrictions
Unfortunately, it’s not uncommon to see issues where an employer withholds a portion of an employee’s final paycheck, especially when the employment relationship is ending on poor terms. To address such cases, Arizona legislators have crafted the law to protect employees against unlawful wage withholding, while providing room for employers to legally withhold wages in reasonable situations.
Under ARS 23-352, employers are allowed to withhold an employee’s wages when “there is a good faith dispute as to the amount of wages due, including the amount of any counterclaim or any claim of debt, reimbursement, recoupment, or set-off asserted by the employer against the employee.” Most cases where an employer legally withholds a portion of the final paycheck include situations where the employee has stolen or damaged property, and the employer is reasonably seeking compensation for the stolen or damaged property. An employer can’t dock an employee’s pay as punishment or for taking short breaks.
It’s important to note that an employer is only allowed to withhold the portion of the final paycheck that is reasonably disputed. Unless the disputed value meets or exceeds the value of the final paycheck, the employer cannot withhold the entire paycheck—only the disputed portion. The employer is required to investigate and resolve the dispute in a reasonable amount of time, so the company can’t withhold the disputed portion for too long. While there isn’t a set time limit for this, it’s reasonable to allow enough time for any related police investigation or court cases to conclude, though the employer may be required to pay additional damages to the employee if the police investigation and/or court case doesn’t end in the employer’s favor.
Paying Out Unused Benefit Time
The state of Arizona doesn’t require employers to include unused benefit time (vacation time, sick time, etc.) on the final paycheck. However, if the company has a collective bargaining agreement, written contract, or formalized company policy that mandates paying out unused benefit time, the employer will be required to include this on the final paycheck.
What to Do if You Don’t Receive Your Final Paycheck
If your employer fails to issue your paycheck within the state’s statutory time period (7 business days if you’re terminated, the next payday if you quit), or if the employer wrongfully withholds any wages due, you have two options for remediation:
- You can file a civil lawsuit in state court for up to three times the unpaid wages (referred to as treble damages)
- Or, you can file a wage complaint with the Industrial Commission of Arizona (ICA) if the wages due are less than $5,000 and the accrual of those unpaid wages doesn’t exceed one year. The Commission will notify your employer, investigate the case, and provide a written Determination that can only be appealed to Superior Court. If your employer doesn’t comply with the Determination within 10 days, the employer will be liable for triple the amount of the unpaid wages found to be owed.
If you don’t receive the final paycheck within 14 days of your last day, you can also contact the US Department of Labor (DOL). That said, if your unpaid wage case doesn’t include a violation of the Fair Labor Standards Act (regulates minimum wages, overtime pay, and recordkeeping requirements), the DOL will most likely direct you to the appropriate state agency. In this case, that’d be the ICA. If there is a violation of the FLSA, the DOL may refer your case to the Wage and Hour Division (WHD).
It’s important to note that you can’t file a civil lawsuit and file a complaint with the ICA—you’ll need to choose one or the other. As such, it’s important to discuss your unpaid wages case with an experienced employment law attorney who can assess your case. The attorney will calculate your unpaid wages and potential damages, and he or she can advise you on whether you should file a civil lawsuit or file a complaint with the ICA. Generally speaking, it’s usually best to file a civil lawsuit rather than a complaint with the ICA if your unpaid wages are more than $5,000.
Call our Employment Law team at (480) 464-1111 to discuss your case today.