Q. We just fired an employee after discovering that he stole $5,000 from the company. Do we have to pay the employee his final paycheck or can we apply that paycheck toward the $5,000 he owes us?
A. In Minnesota, unless the former employee provides a written authorization for you to deduct his debt from his final paycheck, not paying him would run a risk of violating wage payment laws.
Like most states, Minnesota requires prompt payment of an employee’s final paycheck upon termination. State law also prohibits employers from making deductions from an employee’s paycheck for employee debts without a signed authorization from the employee provided after the debt arose.
Violations can result in penalties, interest and an employer potentially having to pay the former employee’s attorney fees and costs.
While state law requires prompt payment of earned wages, there is an argument that stealing from the company breaches an employee’s duty of loyalty. That would imply that he or she is not entitled to payment of wages for the period in which the duty was breached. Courts have recognized this forfeiture doctrine as a justification for employers to withhold payment of wages.
Before you decide to withhold payment of a final paycheck, discuss this situation with your attorney.