If you terminate an employee, or if an employee quits, do you know the laws regarding their final pay? These laws, which vary by state, cover:
- When workers must be paid. This can depend on whether the separation from employment is voluntary or involuntary, final or temporary, and sometimes even the type or work or industry involved.
- Whether commissions and bonuses must be paid at the same time as “regular” wages.
- How to handle accrued but unused vacation or paid sick leave time.
- Penalties for noncompliance. Most states have severe penalties for violations of these laws, including potential criminal penalties and/or jail time.
If you have remote or multistate workers, you must be especially careful to comply with the law of the correct state when paying final wages.
We summarize below the laws for New Hampshire and Massachusetts employers. For other states, click here.
For NH employers
- All employees: By the next payday, or within 72 hours if the separated employee gives one pay period’s notice.
- All employees (except those suspended or laid off due to a labor dispute): Within 72 hours of the employee’s separation.
- Employees suspended or laid off due to a labor dispute: By the next payday.
Treatment of accrued time
- An employer must honor company policy or an agreement that requires the value of accrued vacation time to be paid to a separated employee.
- An employer that willfully fails to pay final wages may be liable for the wages due, or up to 10% of the unpaid wages for each day the final wages remain unpaid, whichever is less. Liquidated damages will not continue after the date a bankruptcy petition is filed, if the employer is eventually adjudicated bankrupt.
For MA employers
- All employees (except those paid commissions): By the next payday, or the following Saturday if there is no regular payday.
- Employees paid commissions: Earned commissions that have been definitely determined and are due and payable to an employee are considered part of the employee’s wages and must be paid, less allowable or authorized deductions, when they leave employment voluntarily.
- All employees (except certain commissioned and manufacturing employees): Immediately upon the employee’s separation or layoff.
- Manufacturing employees: A manufacturer that requires employees to forfeit a portion of their final pay if they do not give notice of voluntary separation forfeits a similar amount if it fires an employee without similar notice.
- Employees paid commissions: Earned commissions that have been definitely determined and are due and payable to an employee are considered part of the employee’s wages and must be paid, less allowable or authorized deductions, when they leave employment involuntarily.
Treatment of accrued time
- The value of accrued vacation time must be paid to a separated employee if the employer has agreed in writing or verbally to provide paid vacations.
- An employer has the option to pay accrued sick time with an employee’s final wage payment.
- An employer that fails to pay final wages must pay restitution to the employee or a maximum civil penalty of $25,000 per violation.The maximum penalty is reduced to $7,000 if the employer has no prior violations.
- For a first offense, criminal fines of up to $25,000 may also apply and/or the employer may be imprisoned for up to one year.
- For a second offense, the criminal fine increases to $50,000 and the maximum jail term is two years.
For all U.S. states, click here for a chart that summarizes each jurisdiction’s requirements on when to pay final wages to an employee who has separated from employment, how to treat any accrued but unused time and the penalties that apply if an employer fails to comply with these requirements. A notation of “N/A” means there is no law on the issue in the jurisdiction.
If you need assistance interpreting these laws or applying them to your unique situation, we recommend that you subscribe to one of our HR products, where you can have access to HR expertise. Your Payroll Specialist can help you determine which product best meets your needs and sign you up.