Employers must pay their employees on payday—and make sure the money is in the bank. Otherwise, they risk liability for double the amount due as liquidated damages under the Fair Labor Standards Act ().
If payment is delayed, federal courts will determine if the payment is “reasonably prompt” under the circumstances. If the checks are bad, the court probably will conclude that wages weren’t paid when due and will award double damages.
Recent case: A group of Mexican farm laborers hired under one of the U.S. government’s migrant worker visa programs sued when their employer, Shannon Produce Farms, didn’t regularly distribute paychecks. In addition, some of the checks were not negotiable when Shannon Produce handed them out, since there was no money in the account they were drawn on. (Adding insult to injury, it took the employees some time to figure that out. It seems that Shannon Produce had confiscated the workers’ identification papers, making it impossible for them even to attempt to cash their checks.)
A federal court said Shannon Produce violated the FLSA because it did not pay the workers at least minimum wage when it was due.
This, coupled with the fact that the workers were unable to cash their checks without proper identification, added up to the conclusion that payment wasn’t “reasonably prompt,” as the FLSA requires. (Morales-Arcadio, et al., v. Shannon Produce Farms, No. 605-CV-062, SD GA, 2007)