Here's a few "heads up" tips to take into account when issues the last paycheck to a former employee.

Issue quickly

Many times, the last paycheck is associated with a termination or an employee quitting. In either case, tensions can be high and misunderstandings are easy to create. It’s usually best to just cut that last paycheck and get that out of the way, rather than delaying and creating the appearance of “punishing” the former employee. In lawsuits, it’s common practice to assume a jury wants to see that the company acted in a fair manner. Any unnecessary burdens you place on an ex-employee can be a detriment if a lawsuit arises out of the situation.

Keep in mind the deductions applicable

When cutting that last paycheck, try to make sure you are using a legal and appropriate methodology when applied to cashing out saved-up vacation and sick time. Also pay attention to the different levels of law that can affect the paycheck calculation.
Occupational Safety and Health Administration (OSHA) - When looking to get reimbursed for equipment, like safety equipment, keep in mind that there are limitation on what you can charge employees.
  • Fair Labor Standards Act (FLSA) – A major way FLSA affects the last paycheck is that employees must maintain a pay rate that meets the minimum wage for all hours worked. Your company can’t take a set of deductions in the last paycheck that lowers that payrate to less than the minimum. This risk most commonly arises when dealing with employees already being paid at the minimum wage level.
  • Employee Retirement Income Security Act of 1974 (ERISA) – This legislation affects many things like disability plans, life insurance, pension and medical plans. It’s best to make sure you have the documentation of the employee’s consent to these plans.
  • Family and Medical Leave Act (FMLA) – Make sure your HR and payroll staff understand how an employee that is involved with FMLA is affected when being handed their last paycheck. 
Don’t forget to check state and city level laws, too.
As a business owner, it’s important to have experts in-house, or resources out-of-house, that can cover you when calculating paychecks. Class action lawsuits frequently are created from an initial disgruntled employee that then seeks out others that were treated in the same manner.
If the employee doesn’t agree to the amount of the paycheck, have then submit in writing an explanation of their concerns. Make sure you document what steps your company takes to resolve the situation. It’s much better to have a sheet of paper with a daily log of the steps your HR staff took, then to show up to a lawsuit with no documentation.
Modern Business Associates is an HR company that focuses on payroll and HR outsourcing. We routinely work with clients on payroll processing and termination issues in St. Petersburg, FL. As a Professional Payroll and HR outsource organization, our clients rely on us to help them effectively deal with these kinds of topics.