Whether you were let go by your employer or quit your job, under federal and state law, your employer must pay you for all hours worked. Like your regular paychecks, your final wages are subject to certain deductions, whether mandatory or voluntary. These deductions must be in accordance with federal and state law.
The Fair Labor Standards Act, which governs federal minimum wage and overtime, allows an employer to make certain deductions from regular and final wages, even if they bring your pay below the required minimum wage:
- Payroll taxes, such as federal and state income tax, Social Security tax and Medicare tax
- Wage garnishments issued by a statutory entity, such as the courts or the Internal Revenue Service
- Union dues
- Cash shortages stemming from theft or fraud by the employee
- Vacation pay advances
- Tip credits
- Voluntary wage assignments that profit only the employee, such as health insurance and retirement contributions
- Paycheck loans and advances
In general, deductions cannot be made for uniforms and associated maintenance costs, most inventory or cash shortages, damaged or lost equipment, and damaged employer vehicles if they will cause your pay to drop below minimum wage. Your employer should review the FLSA provisions carefully before making deductions from final wages, because exceptions may apply. For example, deductions for uniforms and uniform cleaning costs, meals and lodging are allowed only in restricted circumstances.
Federal law does not say whether employers must pay for unused vacation or sick time when an employee terminates. This generally is left up to state law.
Most states have final paycheck laws, which are more specific and often more beneficial to employees than federal law. In general, when both federal and state law apply, employers must use the law that benefits the employee the most. It therefore is highly important that employers consult state law for final paycheck rules.
For example, an employer in Washington can deductions from final wages without the employee's consent for:
- Federal or state requirements
- Wage garnishments
- Surgical, medical or hospital care services, with exceptions. For example, deductions cannot be made from final wages for expenses the employer paid in the last pay period for medical costs unrelated to the employee's work duties.
Some deductions are permissible in Washington only if the employee verbally agrees or consents in writing. This includes deductions for benefit plan contributions such as health insurance and pension plan, payments to creditors or third parties, and employee loans -- including reasonable interest. The employer is allowed to reduce final wages for all of these deductions even if they cut into the employee's minimum wage.
Specific deductions can be made in Washington only if they happened during the final pay period, such as alleged employee theft and breakage or loss of equipment if the employer can prove that these acts were intentional. The employer cannot make these deductions from final wages if they will cause the employee's pay to drop below the minimum wage.
Regulations affecting deductions from final wages for paycheck advances vary by state. For example, in California, an employer is prohibited from making a lump sum deduction from final wages to recover the outstanding balance on a paycheck advance, regardless of whether the employee consents in writing. In this case, the employer may deduct only the regular installment amount.
Due Date for Final Wages
Under the FLSA, your employer does not have to give you your final paycheck at the time of separation, but can wait until the next payroll period. Many states have last paycheck laws that dictate when employees should receive final wages. The due date may depend on the conditions surrounding your separation, such as whether you quit or were fired or discharged,
Many conditions impact final wages. Contact the state labor department, the United States Department of Labor, or an employment consultant for clarification if necessary.
Grace Ferguson has been writing professionally since 2009. With 10 years of experience in employee benefits and payroll administration, Ferguson has written extensively on topics relating to employment and finance. A research writer as well, she has been published in The Sage Encyclopedia and Mission Bell Media.