When issuing an employee's last paycheck, there are several things to keep in mind to be sure to stay within the legal bounds of final pay law. Whether it's a sudden resignation or a zero-tolerance immediate discharge, the clock is ticking on issuing the employees' final paychecks. If you get it wrong, you can face stiff penalties under federal wage and hour laws.

In a BLR webinar titled "I Quit/You're Fired: Best Practices for Administering Final Pay and Severance Payments," Terry Price outlined some guidance for issuing that last paycheck. Besides getting the timing right, you also need to make sure you're prepared for other various “last pay” considerations, including severance and questions regarding unemployment claims. It can take just one disgruntled parting employee to represent a class of similarly situated individuals and initiate a wage and hour class action that could devastate your company. Don't risk such costly legal entanglements; make sure your final pay procedures are up to date and in order.

10 Rules for Preventing Lawsuits Regarding an Employee's Last Paycheck

Here are 10 rules for preventing lawsuits with employees:

1. Hope is not a strategy. As a manager, you can't simply hope that bad things won't happen; you need to do things to minimize the risk.
2. Earn respect. Managers need to earn the respect of the employees. This way, when you issue discipline and the like, employees understand that you have their best interests at heart.
3. No surprises. Employers should not withhold the necessary information in order to allow employees to improve their performance or to know what your expectations are.
4. Be prepared. Understand what the potential pitfalls are. Understand where and what your goal is and how to best achieve it.
5. No “BS.” You have to be serious about the venture of preventing lawsuits. You must exhibit this seriousness in daily actions.
6. The perception of fairness. Employers need to have procedures in place that allow you to show your employees fairness. Likewise, the perception of fairness becomes very important if a lawsuit is filed because the jury will need convinced of fairness. Price noted that "no matter what the issue is, in most jury cases, the jury's determination will come down to their view of whether they perceive what you did as being fair."
7. Know when to walk away and know when to run. Try to develop intuition through practice, education, training, and experience. Understand what situations are so bad they should be completely avoided.
8. Investigate employee concerns properly. Don't trivialize an employee's concerns for any reasons, including past employee behavior. Follow rules to ensure investigations are uniformly performed.
9. Walk a mile in their shoes. Try to see whatever their concern is. This is the best way to realize when you're approaching someone in a fair, constructive way.
10. Don’t be afraid to ask for help. Ask people around you who have done what you're doing for advice if necessary. Reach out to counsel if needed to understand your legal obligations and rights.

How Does This Relate to Final Pay Law?

While preventing lawsuits is a grand notion, you may be wondering how this all ties back in to final pay laws. It all comes full circle when you understand that issuing an employee's last paycheck correctly and in a timely manner is one final step to not only stay within your legal responsibilities, but also to avoid a lawsuit later. An employee who may not have otherwise been disgruntled may become so if they do not get their final pay in full and on time.

When wages must be paid after you terminate an employee or when the employee resigns depends on whether the employer is covered by federal, state or local laws regulating final pay and what the applicable law(s) says. You can face severe penalties for paying late, sometimes totaling many times what the employee would have otherwise been due.

Since final pay can be triggered by federal, state or other local government statutes, regulations and/or common law, what has to be included in the computation depends on which laws apply and what they say to include. In some cases, multiple recoveries might be allowed.

In a related article, Price addresses what deductions can be made from an employee's final paycheck.

The above information is excerpted in part from a BLR webinar titled "I Quit/You're Fired: Best Practices for Administering Final Pay and Severance Payments," with expert Terry Price. For more information on final pay law, order the webinar recording. To register for a future webinar, visit http://catalog.blr.com/audio.

Attorney Terry Price, a partner in the Birmingham, Alabama, office of Ford & Harrison, LLP, has practiced employment law for more than 30 years. He assists employers in the development and day-to-day management of EEO, employee benefits, workplace safety and health, and management.