Final Paychecks: What is Required When an Employee Separates from Employment?
What are Alabama’s rules surrounding final paychecks?
- Alabama does not provide regulations on when a final check must be issued, so employers are required by the Fair Labor and Standards Act (FLSA) to provide the final paycheck on the next scheduled payday, regardless of whether the employee quit or was terminated.
- The final paycheck should include the employee’s regular wages from the most recent pay period, plus any other types of compensation such as commissions, bonuses, and accrued sick and vacation pay subject to payout.
- Final wages are treated the same as other wages regarding 401(k) plans unless the employee changes his/her election. Be sure to check your plan documents.
- While an employer may be able to withhold money from the final paycheck if the employee owes the organization, the employer cannot withhold the paycheck itself for any reason as this is considered withholding unpaid wages. Failure to follow final paycheck laws could lead to fines and penalties, so be sure to consult with legal counsel before taking any actions to hold a final paycheck.
What if the employee never picks up or fails to cash his/her final paycheck?
- Alabama employers must report and remit unclaimed wages annually. Any checks unclaimed as of June 30th of a year must be reported and remitted no later than November 1st of that year. After that, the former employee must reach out to the Office of State Treasurer Unclaimed Property Division to claim the wages.
- If the former employee had a court-ordered garnishment against his/her wages, the employer may be required to submit a Notification of Employment Termination on that order. Be sure to reference the original garnishment order and reach out to the listed contact information if you have questions. While the Garnishment affects the employee’s wages, the employer is ultimately responsible for withholding the garnishment and remitting it properly, so make sure to report the employee as terminated to avoid penalties or fines for failure to withhold and remit.
Have any final paycheck or employee termination questions? Don’t guess or assume, contact your BMSS professional today by calling (833) CPA-BMSS.