Last paychecks: you have to get them done fast, often under pressure, and get them done right. You have to know what you can and can’t deduct. Often, there’s also the issue of stopping automatic payments in time to avoid overpaying. When figuring out the details of an employee’s last paycheck, how do you keep it all straight and avoid errors?
In a BLR webinar titled "Employee Final Pay Rules: HR Rights and Obligations for Successful Separations," Michelle Lee Flores outlined some tips on how to get an employee’s last paycheck done correctly, and in time to be in compliance with your state laws. She gave us some guidance on avoiding errors at that crucial time.
Avoiding Last Paycheck Errors: Accidental Payments and Overpayments
Sometimes, despite your best efforts, an employee may be paid too much in his or her last paycheck. This could happen, for example, if there are errors in calculating the vacation pay that must be included (assuming you are in a state that requires accrued vacation pay to be paid to a terminated employee). Another example might be a situation where you’ve given an employee his or her last paycheck in paper form in order to meet your legal obligations in terms of last paycheck timing, but an automatic bank direct deposit is still scheduled to occur and you cannot get it cancelled in time.
What you should do in these scenarios depends on your state laws, but always think about not only the best interest of the company but also the potential ramifications in terms of how the employee will react. If you’re in a state that requires immediate payment, for example, and you stop payment on a check because it is for an incorrect amount, you have not met your legal obligation to pay the employee immediately and also may cause frustration for the employee.
In most cases, you’re better off allowing the check to go through and pursuing the overpayment separately so that you’ve clearly met your legal obligations. In the example of an immediate paper check plus a future direct deposit that cannot be stopped, you could probably ask for the direct deposit to be reversed – thus still meeting your obligations by providing the paper check, yet not overpaying.
Avoiding Last Paycheck Errors: What if an Employee Claims You Owe More Money?
Another scenario you may face is having a terminated employee who claims his or her last paycheck is incorrect. What should you do if an employee claims you owe more money? In the webinar, Flores advised: "My recommendation is to listen and respond. Listen and respond in a very timely manner. I can’t emphasize this enough: nothing can turn around a bummed-out employee into a very disgruntled and litigious employee quicker than if he or she thinks that you owe him or her money."
This often arises when an employee has a different calculation for vacation time or overtime. This also can happen when there are unpaid hours that are in contention, such as a day that an employee forgot to clock in/out, or other time card errors. Flores noted that you must be sure to "look into it in a very timely manner and respond. Make any necessary corrections, or relay the basis of whatever the calculation is – why your payment is in fact correct, if in fact any money is owed, or, if not, why it is not."
For more information on the rules surrounding an employee’s last paycheck, order the webinar recording. To register for a future webinar, visit http://catalog.blr.com/audio.
Michelle Lee Flores is a partner in the Los Angeles office of Fisher & Phillips LLP. (www.laborlawyers.com) She focuses her practice on all aspects of employment litigation, including jury and bench trials, arbitration, mediation and pre-litigation negotiations, involving sex, race, religion, age and disability harassment and discrimination, wage and hour violations, including class actions, and wrongful termination.