While Jack Bauer may be by the wayside, Fox Network’s 24 is not going away any faster than an employer’s requirement to pay terminated Minnesota employees within 24 hours. An issue that I frequently get calls about (usually somewhat frantic) is a terminated employee’s demand for payment within 24 hours. Unfortunately, too many employers without a dedicated HR professional (owner, accountant, office manager, CFO, etc.) are not aware of this quirky law and often get caught off guard when a former employee demands payment (wages and/or commissions – I’ll just use “wages” to be short) within 24 hours – often including disputed wages such as PTO, commissions, overtime and bonuses.
The so-called “Minnesota Prompt Payment Act” or the “Minnesota Payment of Wages Act”) (I say this because there is no official name so plaintiff attorneys call it the first while defense attorneys tend to call it the latter), Minn. Stat. 181.13-.14, states that employees who quit are entitled to their final pay at the next regular payroll, so long as it is not more than 20 days from the last date worked. As with most wage and hour issues – there are always exceptions for employees covered by a collective bargaining agreement – I won’t go into that here, however.
Regardless, when an employer terminates an employee, the clock is ticking:
the wages or commissions actually earned and unpaid at the time of the discharge are immediately due and payable upon demand of the employee.”
This is easy enough right? If Jack Bauer can save the world in 24 hours, certainly an employer can pay an employee within 24 hours right? Unfortunately, if it were that easy, I wouldn’t feel a need to write this post.
If you know you are terminating an employee ahead of time such as in a RIF, restructuring, or following a failed PIP, it is often easiest and most efficient to present the employee with his or her final paycheck at the termination meeting – just be clear what the check covers (maybe detail it in the termination letter as they won’t remember much of the conversation). All too often they don’t see PTO payout, etc. and then believe they can’t access the online payroll system and so they think they are being denied wages (and don’t think they can verify it themselves and thus the employer must be trying to cheat them out of wages). If that is not possible, whether due to payroll issues or the termination being an on-the-spot discharge without warning, the employee must be paid those wages by the next payroll…unless they make a written demand in which case the employer has 24 hours to pay the employee the unpaid wages. Thus, the word “immediately” is really defined as “within 24 hours”.
How Will You Know If A Written Demand Has Been Made?
MNDOLI makes it very easy for employees to comply with the law – in fact, it provides on its website a sample letter for the employee to send to the employer. The substance of that letter is below:
“Re: Demand for final payment of wages
Dear [Employer name]:
This is a demand for my final wages. My last day of work was [Last day of work]. I have worked and not been paid for [Number of hours] hours and I am owed [dollar-amount owed] at this time.
Under Minnesota Statutes § 181.13, I am entitled to receive all of my final wages within 24 hours of this demand. Please mail my final wages to the address listed below within 24 hours of your receipt of this letter.
Failure to provide final wages within 24 hours of this demand may result in a penalty of up to 15 days of additional wages.”
Note that while MNDOLI’s form provides for the employee to state the amount of hours worked and believed wages, I think I have only seen such specificity once. While that information is sure handy to have, it is not required by the law. Thus, pretty much anything in writing will suffice. Most often I see the following to an HR professional or supervisor: “Dear Joe, please pay me all my wages due and owing to me within 24 hours.” Next, I get the frantic phone call.
What Should Employers Do After Receipt of a Demand for Wages?
As a lawyer for employers, it is very advantageous when a client sends us a demand (before anything is responded to). Often we can tell based on the letter whether the former employee is represented by an attorney based on the wording – and often they will include mention of a statement of reasons for termination, or the “truthful” reasons for their termination. Keep in mind that too is something they can ask for under the law and are entitled to. In fact – if they ask for the trifecta – (1) wages; (2) personnel file; and (3) statement of reasons for termination, the chances are good they either have an attorney, or have been through this process with an attorney before and all kinds of red flags should be shooting up that there is a much bigger issue brewing. Using counsel to assist with this process can be very beneficial as often those documents and responses are what an employer is stuck with through the course of the upcoming dispute.
Back to wages. If there are undisputed wages (i.e. you were just waiting for the next payroll), then payment should be made within 24 hours. If you paid the employee all wages you believed were due, and still got a demand, it would be prudent to ask the employee for clarification of what he or she believes to be owed. Sometimes it is just confusion over PTO, or payment of a bonus not earned because the employee was terminated before the bonus payout date. Sometimes a quick clarification can save a lot of headache and wonder.
What If Final Wages Are Disputed?
Well, this rarely happens. Kidding, of course. If an employer disputes the amount of wages the employee claims to be due, and the employer pays the employee the disputed wages, the employer is not liable for any sum greater than that which the employer in good faith believes to be due – unless the employee recovers it in court. If the terminated employee was entrusted with handling money, the employer has 10 calendar days to audit and adjust the accounts of the employee before they are due. In reality, disputed wages get to be a very tricky issue and one I can’t just write the answer to, unfortunately, as the resolution and/or next steps are often fact specific.
What Deductions Can Be Made to Final Wages?
So, here’s another issue that comes up a lot – what can an employer withhold or deduct from a discharged employee? The statute states:
No employer shall make any deduction, directly or indirectly, from the wages due or earned by any employee, who is not an independent contractor, for lost or stolen property, damage to property, or to recover any other claimed indebtedness running from employee to employer, except as permitted by section 181.79.
Well, now this topic is a whole other blawg (yes, this spelling is intended – I am told this is what lawyer’s “blogs” are artfully called), but for now, just keep that in mind.
How Can Final Wages Be Paid?
Probably the second question I get asked is how to actually effect the payment to the employee – can the employer direct deposit it? Make the employee pick it up when the employee drops off the company’s laptop or cell phone? Stick it in snail mail? Wages must be paid to the terminated employee in the “usual manner of payment” unless the employee requests it be mailed – in which case the date of the postmark of the check is the effective date of payment. Thus, unless instructed by the employee otherwise, just process it as usual.
What Happens If The Employee Was Not Paid Within 24 Hours of Demand?
It happens. Whether someone thinks the former employee is just being difficult (not knowing about the law because the employer didn’t read this!), it got lost among departments, or payroll just couldn’t process it in time (your one payroll person being sick that day), there are always cracks to fall through. In the case of “nonprompt payment”, the employer is liable for a penalty equal to one days’ pay for every day the payment is late – up to 15 days. How is the former employee going to get this money and penalty? The former employee may file a wage claim with MNDOLI or sue the employer in court – conciliation court (a.k.a. small claims court) if less than $15,000.
So, as you can see, this little quirky law has the potential for some headache, but nothing you can’t handle!