Final Paycheck Laws for New York and New Jersey

When an employee departs from your company, they must be given their final paycheck. This check covers all work completed since the previous paycheck was recorded, as well as any remaining monetary value that belongs to the employee within the company (i.e. accrued PTO (paid time off) days, commissions, and bonuses that have been earned up to that point).

All 50 states have specific laws in place regarding when and how employers must provide the final paycheck, and what must be included.

In this post, we will highlight the policies in both New York and New Jersey and highlight the differences to help your business stay compliant.

The Reason for Final Paycheck Policy

It is important to have a final paycheck policy so that employees are cleanly and legally "cashed out" of their employment contracts upon leaving the company. A clear and well-written company policy ensures that final paychecks are added up and dispensed in accordance with the law. Final paycheck laws are place to prevent certain bad-faith employer decisions which might otherwise trend toward final paycheck denial, delay, and theft.

Final Paychecks: Terminated or Quitting

New York

In New York, the law requires that final paychecks must be delivered by the next regularly scheduled payday after the employee departs from the company. This is true both if the employee was terminated or if they quit voluntarily.

For employees paid on commission, final commissions earned must be paid within 5 business days of the employee leaving the company or 5 business days after the commissions become due.

New Jersey

New Jersey law also requires that final paychecks be paid on or before the next scheduled payday. An additional ten days may be allowed in the event of a labor dispute.

Employees paid on an incentive program will be paid a reasonable approximation of their wages until exact amounts can be calculated.

Mass Layoffs and Severance

New York

If an employer conducts a singular or mass layoff of employees, final pay is due by the next scheduled payday. This includes any unpaid work hours, severance, and any remaining value the employee has stored in the company, such as commissions, bonuses, and paid time off. Layoffs are considered to be a form of termination for this purpose.

There is no New York law requiring severance pay for layoffs. However, a company is required to honor their own severance policy consistently and fairly as part of employment contract law.

New Jersey

In New Jersey, employers are required to provide at least 60 days' notice of a lay-off. Without this notice, full-time employees are required to be given one week of severance pay for every year the employee has been with the company.

After layoffs, a final paycheck, including unpaid work hours, unpaid bonuses and PTO, and severance pay, is due no later than the next scheduled payday.

Paying Out Unused Vacation Days and Other Policies

New York

In New York, any pay defined or referred to in the employment contract is part of employee compensation. This includes unclaimed paid vacation days, commissions, and bonuses. The value of all of these must be added up and paid at the end of employment, whether an employee was fired, quit, or was laid off. The exception is paid sick days as required by New York state law NYSSL, but accrued paid sick days under the employment contract are included.

Agreed upon forfeit policies may define certain circumstances where unclaimed paid vacation days may be forfeited.

New Jersey

In New Jersey, employees must be given all pay related to work and performance by the next payday, including commissions and bonuses. However, the law does not require that unclaimed paid vacation days must be included.

The exception is when unpaid vacation days are defined as compensation and/or are promised to be paid upon employment end in the employee contract. In this case, unused paid vacation must be included in the final paycheck.

What Can Happen If You Do Not Pay

In both New York and New Jersey, failure to pay an employee's final paycheck will result in a violation of labor laws under minimum wage violations and unpaid wages. In other words, you may be sued for unpaid wages and prosecuted for wage theft with the same severity as a company paying employees below minimum wage or refusing to grant paychecks to current staff.

How to Handle Ending Employment in NY and NJ

If your company ends employment with an employee, it's important to take the right steps. While you are worrying about cybersecurity protocols and closing out the employee's files, you must also quickly calculate and dispense the final paycheck before the next scheduled payday.

Whether you do business in New York, New Jersey, or both, be sure to honor both the legal requirements and what is written in your own employment contracts and company policy.

MegaPay is here to help you with all your HR needs and questions. If you are unsure of anything in this post, please contact us for clarification.