Employers have a legal obligation to pay their employees fairly and on time. Most businesses are held to these standards by a combination federal and state employment laws, and there are regulatory agencies at both levels of government to enforce the applicable regulations.

Employers who fail to pay their employees on scheduled pay dates may be subject to an investigation, fines, civil litigation, and court-ordered damages.

Federal Paycheck Laws

The Fair Labor Standards Act (FLSA) was passed in 1938 to “put a floor under wages and a ceiling over hours.” It’s the primary federal law regarding the minimum wage, overtime pay, employer recordkeeping requirements, and child labor restrictions. Currently, the law mandates a minimum wage of $7.25/hour (as of 2009) and requires overtime pay of 1.5x wages for hours worked over 40 hours in a week for non-salaried employees.

While the FLSA doesn’t stipulate the frequency of paychecks (that matter is left to state law), the courts have unanimously ruled that the law requires employees be paid in full and on time. The reasoning behind this is that an employee who isn’t paid on time implicitly receives $0 an hour for their, which is obviously less than the minimum wage and therefore in violation of the FLSA. When a company schedules a regular payday, the business is required to abide by the scheduled payday.

Late paychecks are also problematic under the FLSA because they can jeopardize the overtime exemption for salaried employees. Since the salary basis test requires a regular, consistent salary, a late paycheck may mean that an otherwise exempt employee is eligible for overtime pay. Under the FLSA, a non-salaried employee must be paid time-and-a-half for overtime.

Although most wage complaint cases are handled at the state level, filing a federal complaint under the FLSA is still a viable option depending on your situation. You can choose to file a claim with the Department of Labor’s Wage and Hour Division (WHD), or you can file a civil suit in federal court to seek damages from the employer.

If you choose to file a complaint with the WHD, the agency will review your claim, launch an investigation, and seek remediation from the employer on your behalf, usually equal to the amount of unpaid wages. If you choose to file a civil suit in federal court, you may be entitled to full back pay and liquidated damages equal to the amount of unpaid wages.

State Paycheck Laws in Arizona

Under ARS 23-351, Arizona law stipulates that an employer must have at least two paydays a month that are not more than 16 days apart. Furthermore, employers are prohibited from withholding wages (that includes issuing a late paycheck) unless one of the following conditions apply:

  1. The employer is obligated or empowered to withhold wages under state or federal law (includes court-ordered garnishment)
  2. The employer has prior written authorization from the employee
  3. There is a reasonable good faith dispute as to the amount of wages due, including the amount of any counterclaim or any claim of debt, recoupment, reimbursement, or set-off asserted by the employer against the employee

When an employer willfully withholds an employee’s wages (again, that includes late paychecks), Arizona law provides two solutions—the employee can file a wage complaint with the Industrial Commission of Arizona (ICA), or he or she may file a civil action against the employer in state court.

To file a wage complaint with the ICA, the claim must be less than $5,000 and the unpaid wages cannot extend longer than one year. In contrast, there are no minimum or maximum requirements for wage claims in state court.

If you file a wage complaint with the ICA, the agency will review your claim, launch an investigation, and demand payment of unpaid wages on your behalf. When the commission issues an order for payment from the employer, the business has 10 days to comply. After 10 days, the employer will be required to pay three times the amount of unpaid wages.

Should you instead choose to take civil action in state court, ARS 23-355 allows employees to seek liquidated damages of up to three times the amount of unpaid wages. Considering the higher potential damages and the lack of a cap on the wage claim, civil action is typically the preferred route for large wage complaints.

What to Do if your Paycheck is Late

In situations where the late paycheck is an isolated incident, it’s usually best to resolve the matter internally with your employer. If the issue is due to a mistake, the human resources department will be able to resolve the matter much faster than a wage complaint with the ICA or a lawsuit in civil court.

If your employer repeatedly issues late paychecks or unlawfully withholds your wages, here’s what you can do to resolve the problem:

  1. Speak with an attorney – before taking any formal action, you should consult with an attorney to assess your options. The attorney can evaluate your case, calculate the potential damages, and advise you on the best course of action.
  2. Submit a formal letter to your employer – with the help of your attorney, draft a letter demanding the payment of any unpaid wages and the rectification of any unlawful paycheck practices.
  3. File a wage complaint – if your employer refuses to comply with the demands in your letter, and if your wage claim is less than $5,000, the next step is to file a wage complaint with the appropriate regulatory agency. In most cases it’s best to work with the state agency (that’s the ICA in Arizona), but your attorney will advise you on which agency presents the best solution to your situation.
  4. File a civil lawsuit – should you choose to seek civil action with a lawsuit rather than filing a complaint with a labor agency, you can file your suit in small claims court or the superior court depending on the size of your claim.

As you’re going through the process of seeking remediation for unpaid wages, don’t be dissuaded by any excuses from your employer.

Whether your unpaid wages are due to the company’s temporary insolvency or a simple mistake, you have the right to be paid fairly and on time regardless of the company’s situation. For the majority of Americans who live paycheck to paycheck, settling for late paychecks is simply intolerable.

 

Call our Employment Law team at (480) 464-1111 to discuss your case today.

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