Withholding an Employee’s Last Paycheck is (Still) Not Compliant in Business and at Work

Periodically I review a prospective client’s old handbook for any policies unique to the organization that could be added to an updated / compliant handbook.

There was one policy that I will not add: withholding an ex-employee’s last paycheck upon separation of employment until all company property is returned. It’s not compliant to withhold a separated employee’s final paycheck for any reason.

As outlined in Section 191 of NYS Labor Law:

When are employers required to pay employees whose employment has ended due to termination, retirement, or resignation?

Employees whose employment has ended are entitled to be paid no later than the pay day on which their next pay would have been due had they still been employed. Upon request of the employee, employers are required to mail the employee his or her wages. Nothing in the Labor Law prevents an employer from paying a terminated employee their wages at:

•  The time of termination
• Some other time before the payday on which the wages would have been due.

Even though this compliance requirement has been and continues to be well-communicated, I continue to periodically receive the same query from an employer (they often already know the correct answer, however it appears to be a bit of wishful thinking):

• Can I withhold the final paycheck until the property is returned? No.
• Can I deduct the value of the unreturned company property from the ex-employee’s final paycheck? No. 

It’s clearly frustrating, no question. However, my responsibility in this instance is to minimize loss for the employer in the form of compliance penalties and other financial costs.

What compliant options does an employer have when an ex-employee doesn’t return company property? (In my experience, it’s usually an older laptop.) The employer can invoice the ex-employee for the current value of the company property. If the invoice is not paid, it may be easier for the ex-employee to reimburse the employer in smaller weekly or monthly payments. If the invoice is still not paid, the NYS employer can pursue payment from the ex-employee in small claims court. (Note: an ex-employee can also pursue unpaid wages due from an ex-employer in NYS small claims court.)

Do you pay ex-employees their final (and full) paycheck for all time worked no later than when the next pay would have been due had they still been employed, in business and at work?