Today’s question deals with a very important issue – final paychecks. Every state has their own rules when it comes to final paychecks including when the check should be issued. Employees need to know what applies in their situation.
And no offense to my California friends, but California has a “uniqueness” when it comes to employment and labor law (you probably already knew that). Here’s the story.
I live in California and was terminated in January. On my final check, I received my wages and accrued vacation. I also noticed on my final check stub that I still had a balance of 1.409 hours of vacation time which was not paid out.
My former employer claims that they don’t have to pay that amount because it’s the vacation I accrued during the time I was being paid out. But don’t my final hours still count toward accrued vacation time. Do you know if the company legally should pay me?
So I reached out to my friend Heather Bussing for some insight. She’s an employment attorney specializing in training and preventative advice for businesses. Heather is also a regular contributor to HR Examiner.
Heather, are employers legally obligated to pay out an employee’s vacation balance upon termination?
[Heather] Employers are not required to give paid vacation. But if they do give it, then each state has its own rules about how vacation time gets treated at the end of employment.
In California, both vacation and PTO vest as the employee works. The employer is required to pay vested vacation through the last minute worked at the company. So if 1.4 hours was accrued while the reader was working, then the employer owes it. It sounds like the employer is saying the payroll system gave credit for the accrued vacation that was paid. This is weird. And a system that does this is either bad or broken. So I would follow up.
Employers often make errors on final paychecks, so it’s worth making sure any final check is correct. But for 1.4 hours, I would also do a sanity check to decide if it’s worth the time, emotional energy, and stress of fighting over it. If the employer asked me, I’d tell them to pay it. If the employee asked me, I’d probably tell them to let it go unless they were sure that it was owed and wasn’t just an honest mistake.
I’ve always been under the impression that sick pay or personal time benefits are different than vacation (when it comes to being paid out at termination). Is that true? Why or why not?
[Heather] Again, each state has its own wage and hour quirks. In most states, and under current Federal law, employers do not have to give paid sick leave. But that has been a hot topic, and laws are changing. Federal legislation was introduced that would require employers with more than 15 employees to give at least 7 paid sick days. It is predictably stalled in Congress. So, don’t hold your breath.
Connecticut, Maryland, Massachusetts, Vermont and Washington have all passed some form of paid sick leave. Some cities, such as San Francisco, Long Beach, and Washington DC, also have paid sick leave for people who work there. New York City and Portland are considering local paid sick leave laws.
In California (if you don’t work in San Francisco or Long Beach) sick leave does not vest the way vacation time does. Sick leave is ‘use it or lose it’. Employees don’t get paid for unused sick leave, and they can’t save it up.
Many employers have gone to personal time or PTO (paid time off) that combines sick and vacation leave, and it doesn’t matter why someone’s gone. However, PTO is treated like vacation. So PTO will vest and must be paid out on termination.
An employer can cap how much time employees can save up in any year, and how much they can rollover from year to year. This is smart because employees need vacations, and caps encourage them to take them. And employers don’t want a huge liability on the books for accrued PTO.
The reader didn’t ask this but, I get asked a lot about final paychecks. When is an employee entitled to get their final paycheck?
[Heather] It depends on whether the employee is being fired, or quit, and how much notice was given. In California, if the employee quits and gives at least 72 hours notice, or the employee is fired, then the employer has to give the final paycheck, including any vested vacation, before the employee walks out the door on his last day. If the employee quits with less than 72 hours notice, the employer has 72 hours to get him the final check. Here’s more information on final paychecks and penalties in California.
The final paycheck does not have to include expense reimbursements. It also does not have to include commissions when there is a written agreement setting out how and when they are paid. These amounts have to be paid, just not upon termination. Union contracts, public employees, and employees with written contracts may have different timing on final paychecks too.
If an employee is concerned that their paycheck isn’t correct (for whatever the reason), what should they do?
[Heather] All California employers are required to provide pay stubs with the paychecks that show the amounts earned, and all withholdings and deductions. Most payroll companies provide that information for both the current check and year to date. If you are not getting that information, then ask the employer for it.
If you have left the company, then send a letter requesting it. If there has been a mistake, or something has not been paid, send a written request explaining what the problem is, and include a copy of your paycheck. If you don’t get a response, or the response you want, check with the agency in charge of wage hour issues in your State or call an employment attorney.
Many thanks to Heather for sharing her expertise. Even if you don’t live in California, it’s important to know what is permissible when it comes to your final paycheck. If you’re ever in doubt, seek advice. It is possible to get educated about a subject without filing a lawsuit.1