Ending employment can be stressful; getting paid should be easy. State and federal laws address the payment of wages, including when employment ends. The relevant federal law is the Fair Labor Standards Act (FLSA) which currently mandates a minimum wage of at least $7.25 per hour. Arizona recently passed the Fair Wages and Healthy Families Act establishing a new state minimum wage each year through 2020, with annual raises thereafter. As of January 1, 2019, almost without exception, all employees in Arizona – whether full-time, part-time or temporary – must be paid at least $11.00 per hour for ALL hours worked (and if nonexempt, overtime calculated at the rate of 1.5 an employee’s hourly rate for all hours worked in excess of 40 each workweek). This state law also requires that employees be allowed to accrue and then use paid sick leave for a wide range of reasons outlined in the law. Employees may not agree to work for less than Arizona’s minimum wage; the minimum wage obligation cannot be waived by any oral or written agreement or in an employment contract. Minimum wage, calculated at the higher of state or federal rates, must be paid for ALL hours worked, regardless of the frequency of payment and regardless of whether the wages are paid on an hourly, salaried, commissioned, piece rate or any other basis. Failure to comply with the Arizona Minimum Wage Act subjects the employer to substantial penalties and damages. Employees often have questions about termination of benefits, severance packages, vested stock options, and final paychecks.
What Are The Final Paycheck Rules If You Quit?
When an employee voluntarily resigns, the employer must pay all earned final wages no later than the standard payday for the current pay period during which the employee resigned (A.R.S. § 23-353). For example, if an employer pays its employees every Friday for the preceding week’s wages, an employee who quits on a Wednesday should receive a final paycheck the next Friday just like all other employees.
The employer should issue the final paycheck according to the normal procedures (direct deposit, check, etc.), although the employee has the right to request payment by check delivered by mail. Earned wages include overtime and earned commissions through the date of resignation. Additional earned commissions may be required depending upon the employment agreement.
What Are The Final Paycheck Rules If You Are Involuntarily Terminated Including in a Lay Off?
If an employee is involuntarily terminated, the final paycheck is due within 7 business days or by the next regular payday, whichever comes first. If the final paycheck is a check or money order, it must be dated for that payday (post-dating checks is not allowed).
Must Unused Paid-Time-Off (PTO) Be Paid Included With A Final Paycheck?
Employers in the State of Arizona are not required to offer vacation time or PTO, but ARE REQUIRED to provide Paid Sick Leave (PSL) pursuant to the Healthy Families and Fair Wages Act. It follows that if employers are not required to offer PTO then they also are not required to pay out unused PTO if they do offer it, so long as the employer has a written policy informing employees that unused PTO will not be paid out but instead will be forfeited. Companies typically address payout of PTO upon cessation of employment in an employment manual or handbook. PSL never has to be paid out upon separation.
Are Severance Packages Included In The Final Paycheck?
No state or federal law requires employers to offer severance packages to employees who are laid off or terminated. However, if severance packages are standard practice for the employer, or if a severance package is included in the employee’s contract, then the severance compensation must be included in or with the final paycheck, or as set forth in the employment plan or agreement.
Under What Conditions Can Your Final Paycheck Be Withheld?
An employer may withhold part or all of a final paycheck if there is a reasonable good faith dispute over the amount of the wages due. This usually involves an employer with a valid claim of reimbursement, debt, recoupment, or counterclaim against the employee or an inability to calculate the amount due in commissions in time to include it in by the paycheck deadline. In these cases, the employer must still pay the undisputed portion of the employee’s wages by the following payday or within 7 days, whichever comes first. An employer is prohibited from requiring an employee to execute a release of claims as a prerequisite to paying the undisputed portion of the employee’s earned wages.
Can A Former Employee Sue For Unpaid Wages?
According to A.R.S. § 23-355, an employee or former employee can file a civil suit against the employer seeking unpaid wages and damages. If the court finds the employer unlawfully withheld wages, the employee or former employee is entitled to 3 times his/her unpaid wages. For claims of earned but unpaid wages of $5000 or less, an employee may file a complaint with the Industrial Commission of Arizona’s Labor Department rather than institute a civil action, The Labor Department will investigate the claim and if they determine the claim has merit the employer may be subject to fines and/or judicial action by the state.
Is Arizona An At-Will Employment State?
Unless there is a written contract between the employer and the employee, all employees in the State of Arizona are considered at-will employees (A.R.S. § 23-1501). This means either party may end the employment relationship at any time, for any reason (or no reason), with or without notice. However, there are exceptions to this rule. Except for employers with a very small workforce, state and federal laws prohibit discrimination based on race, color, religion, national origin, gender, age (over 40), pregnancy, disability, or other classes protected by law, and thus terminating an employee based on their membership in a protected class would be illegal. Employers are also prohibited from terminating an employee in retaliation for his/her complaining of discrimination; reporting illegal acts of the employer to authorities (whistleblowing), or refusing to break state and/or federal laws.
Applicable Labor Laws
While there are no federal laws that dictate how long an employer has to issue an employee’s final paycheck, and there is no state or federal requirement to offer severance pay, there are several federal and state laws that govern labor, wages, and the workplace:
- The Age Discrimination in Employment Act (ADEA) protects employees who are age 40 or older from discrimination based on their age.
- The Americans With Disabilities Act (ADA) prohibits employers from discriminating against employees or job applicants based on an actual or perceived disability. When assessing an employee’s or job applicant’s abilities, employers must limit the assessment to whether the employee or potential employee can perform the job’s essential responsibilities with or without reasonable accommodations.
- The Equal Pay Act (EPA) requires to provide equal compensation to men and women who are performing the same work.
- The Fair Labor Standards Act (FLSA) dictates the federal minimum wage and overtime-pay requirements. The federal minimum wage currently is $7.25/hour, and employers are required to pay 1.5 times an employee’s wages for hours worked in excess of 40 hours in a workweek.
- The Family and Medical Leave Act (FMLA) requires employers to provide employees unpaid time-off for qualified family and personal medical situations. All employees that have been with the company for over a year and have worked at least 1,250 hours during the previous year are eligible for FMLA. Employees are guaranteed up to 12 weeks of unpaid leave with continuing benefits, and upon their return to be reinstated in their previous job position or an equivalent position (including financially).
- The Occupational Safety and Health Act (OSHA) provides that all employees have the right to work in a safe environment, and sets forth various standards companies in various industries must adhere to.
- The Pregnancy Discrimination Act (PDA) prohibits employers from discriminating against an employee based on pregnancy, childbirth, or maternity-related healthcare issues.
- Title VII of the Civil Rights Act (Title VII) prohibits employers from discriminating against employees and job applicants based on race, color, religion, national origin, and gender. Employers are also required to provide reasonable accommodations for an employee’s deeply held religious beliefs and practices unless doing so creates an undue hardship for the employer.
- The Arizona Civil Rights Act also prohibits discrimination against employees and job applicants based upon a number of protected categories. Local ordinances and other laws may also provide additional protections.
Arizona’s Fair Wages and Healthy Families Act addresses payment of minimum wage, and provides stiff penalties for violations. The Act also requires paid sick leave and provides penalties for failure to comply.
Depending upon the terms of your employment and termination, various federal, state and/or local laws may apply in a workplace. It is always a good idea to check with experienced employment counsel to review your specific situation and evaluate potential claims you may have. The attorneys at Faulkner Law Offices, PLLC, have decades of experience in helping employers and employees in all aspects of employment law.