State Laws On Final Pay: What And When To Pay Terminating Employees
In an attempt to help employers get a handle on what and when to pay departing employees, here’s a state-by-state summary of vacation pay requirements, as well as a chart at the end of the report that summarizes the timing of each state’s final pay laws.
Some states don’t address the issue of vacation pay upon termination or dictate the timing of final pay. These states are so noted. A few states come right out and say that, upon termination, employers must pay for accrued or earned vacation. Most states take a middle ground. They include earned vacation as part of wages, and wages must be paid to employees upon termination. Or they don’t push vacation pay into the wages column but do require that you follow your company policy when it comes to vacation pay.
In other words, if your policy provides for payment of accrued fringe benefits, including vacation, upon termination, then you must pay up. And if your policy is to pay for vacations, then you must pay for the accrued part upon termination.
The same is true for states’ final pay laws — every state law is different. Note: If a state doesn’t have a final pay law, final pay is usually due by the next regular payday.
As always, check with your state department of labor for complete regulation language, and to ensure you stay on top of any recently approved changes.
Vacation Pay Upon Termination
Alabama
Vacation pay is considered a fringe benefit of the company and is not a required payment by law. It is left up to the employer whether to offer the employee fringe benefits; the only exception would be something written in the company handbook stating that the employee will be given these benefits.Alaska
No provision specifically requiring the payment of accrued vacation at the time of termination. However, upon termination, employees must receive any payments agreed to by the employer.Arizona
Final wages include vacation pay, when vacation pay is promised under a company policy or practice.
Arkansas
Payment depends on employer-employee contract.
California
Upon termination of employment, all earned and unused vacation must be paid to the employee at his/her final rate of pay, unless otherwise stipulated by a collective bargaining agreement. Vacation pay accrues as it is earned, and cannot be forfeited, even upon termination of employment, regardless of the reason for the termination. Employers may not have a “use it or lose it” vacation policy; but they are allowed to place a cap or ceiling that limits the amount of vacation that can accrue.
Colorado
If an employer provides vacation for an employee, the employer shall, upon separation from employment, pay vacation pay earned and determinable according to the terms of any agreement between the employer and employee.
Connecticut
If an employer policy or collective bargaining agreement provides for the payment of accrued fringe benefits upon termination, including but not limited to paid vacations, and an employee is terminated without having received such accrued fringe benefits, such employee shall be compensated for such accrued fringe benefits, exclusive of normal pension benefits, in the form of wages in accordance with such agreement or policy.
Delaware
Final wages include accrued vacation pay, when an employer agrees to provide vacation pay under a company policy, employment contract, or collective bargaining agreement. All benefits and wage supplements must be paid within 30 days of the date they become due.
District Of Columbia
Although there is no provision requiring the payment of vacation pay following an employee’s termination, courts have interpreted wages due upon termination to include accrued vacation pay.
Florida
No provision.
Georgia
No provision.
Hawaii
Although there is no provision requiring the payment of vacation pay following an employee’s termination, courts have interpreted that wages be paid in lieu of vacation benefits upon termination if an employer’s handbook so provides. All employers are statutorily required to notify employees of the policy regarding vacation pay either in writing or by posting it.
Idaho
Although there is no provision requiring the payment of vacation pay following an employee’s termination, courts have interpreted wages due upon termination to include accrued vacation pay.
Illinois
Unless otherwise provided in a collective bargaining agreement, whenever a contract of employment or employment policy provides for paid vacations, and an employee resigns or is terminated without having taken all vacation time earned in accordance with such contract of employment or employment policy, the monetary equivalent of all earned vacation shall be paid to him/her as part of his/her final compensation at his/her final rate of pay. No employment contract or employment policy shall provide for forfeiture of earned vacation upon separation.
Indiana
Although there is no law regarding the payment of vacation pay following an employee’s termination, courts have interpreted wages due upon termination to include vacation pay. However, employees earn vacation pay simultaneously with wages and other forms of ongoing compensation if an employer agrees at the time of hire to pay vacation to an employee, and has no agreement or policy to the contrary.
Iowa
If vacation is due to an employee under an agreement with the employer or a policy of the employer establishing pro rata vacations, the amount of vacation pay due as wages on termination must be proportionate to the fraction of the year that the employee was actually employed.
Employers must, in most cases, pay the earned but unpaid vacation of a suspended or terminated employee no later than the next regular payday.
Kansas
Company policy controls whether terminating employees can be paid for accrued vacation.
Kentucky
Wages include vested vacation pay and any other similar advantages agreed upon by the employer and employee or provided to employees under an established policy.
Louisiana
Terminating employees must be paid all earned vacation pay if, under the employer’s policy, they are eligible for and have accrued the right to take paid vacations, and they have not taken or been compensated for the vacation pay as of the date of discharge or resignation.
Maine
If an employee receives vacation pay under an employer’s policy, vacation pay has the same status as earned wages and must be paid upon termination.
An employer must pay any earned but unpaid vacation of a terminated employee in full on or before either the next day after a demand on which the employee would regularly be paid on or a day not more than two weeks after the day on which the demand is made, whichever is earlier.
Maryland
If an employer informs employees in writing at the time of hire that unused vacation leave will be lost or forfeited upon termination, then an employee will not be able to claim it. On the other hand, where the employer does not have a written policy that limits the compensation for accrued leave to a terminated employee, that employee is entitled to the cash value of whatever unused earned vacation leave was left — provided it was otherwise usable.
Massachusetts
Discharged (fired or laid off) employees must be paid all wages due and owing on the day of termination. The term “wages” includes all vacation time earned under the employer’s written or oral policy. The state Attorney General has interpreted the preceding sentence to require that accrued vacation pay be included with final pay.
Michigan
Final wages include vacation pay, when vacation pay is provided under an employment agreement or company policy. Upon termination, employees are to be paid fringe benefits on the regularly scheduled payday for the period in which the termination date occurs, unless otherwise specified in a written contract or policy.
Minnesota
Final wages include vacation pay, when vacation pay is provided under an employment agreement or company policy.
In late 2007, the state supreme court ruled that vacation benefits are “wholly contractual,” meaning company policy may define entitlement to pay for earned but unused vacation upon termination.
Mississippi
No provision requiring the payment of accrued vacation at the time of termination, unless employees work for the state.
Missouri
No provision specifically requiring payment of accrued vacation at the time of termination. However, employees may have a contractual right to vacation pay. If so, the terms of their agreement govern whether they are entitled to vacation pay on termination.
Montana
No provision requiring the payment of accrued vacation at the time of termination. However, the Montana attorney general has determined that “vacation pay which has been earned and is due and owing must be considered in the same category as wages and is collectable in the same manner and under the same statutes as are wages.”
Nebraska
Paid leave, other than earned but unused vacation pay, isn’t included in final wages, unless the employer and employee specifically agree otherwise.
Nevada
The payment of unused vacation isn’t required.
New Hampshire
Employers must provide written descriptions of policies regarding the payment of vacation pay. Final wages include vacation pay, when vacation pay is provided under a company policy or practice. Employees advanced vacation pay and who sign an agreement at the time pay is advanced may authorize employers to deduct those amounts from final pay.
New Jersey
Final wages include vacation pay if there is an agreement or company policy to pay.
New Mexico
Final wages include vacation pay if there is an agreement or company policy to pay.
New York
Whether an employer is obligated to pay for unused vacation time depends upon the terms of the organization’s vacation and/or resignation policy. State courts have held that an agreement to furnish benefits or wage supplements, such as vacation, can specify that employees forfeit accrued benefits under certain conditions. To be valid, the employer must have notified employees, in writing, of the conditions that nullify the benefit.
If an employee has earned vacation time, and there is no written forfeit policy, the employer must pay the employee for the accrued vacation.
North Carolina
No employer is required to provide vacation for employees. However, if an employer provides vacation for employees, the employer shall give all vacation time off or payment in lieu of time off at the time of termination in accordance with the company policy or practice. Employees must be notified in writing or through a posted notice of any company policy or practice that results in the loss or forfeiture of these promised wages. Employees not notified are not subject to forfeiture.
North Dakota
All earned vacation time must be paid to employees upon separation from employment. No employment contract or policy may provide for forfeiture of earned paid time off upon termination. An employment contract or policy may, however, require that employees take vacation by a certain date or lose the vacation, provided the employee is given a reasonable opportunity to take the vacation. The employer must pay the employee for accrued vacation time at the regular rate of pay earned by the employee just prior to separation.
Ohio
The statute reads as follows: Employers that agree to provide vacation pay become the trustee of the funds. Payment must be made within 30 days after the close of the pay period during which the pay was earned.
However, multiple court decisions as recent as 2006 have said that company policy dictates whether vacation pay is paid upon termination.
Oklahoma
Vacation pay is included as wages payable upon termination, as long as the payment is agreed upon between the employer and the employee, or provided to the employee in an established policy.
Generally, an employer must pay an employee for unused vacation time in full at the next regular payday for the pay period in which work was performed.
Oregon
Employers are required to honor any established policy or agreement relating to the payment of benefits, such as accrued vacation pay upon termination. Employees who qualify for the payment of benefits under the employer’s policy should be paid for these upon termination.
Pennsylvania
Final wages include vacation pay, when an employer agrees to provide vacation pay under a company policy or practice.
Rhode Island
Whenever an employee is separated from the payroll of an employer after completing at least one year of service, any vacation pay accrued by collective bargaining, company policy, or other agreement between employer and employee shall become wages due and payable in full or on a prorated basis with all other wages on the next regular payday for the employee.
South Carolina
Final wages include vacation pay, when vacation pay is provided under a company policy or employment agreement.
Vacation pay must be paid within 48 hours of the time of separation or the next regular payday, which may not exceed 30 days after written notice is given.
South Dakota
No provision requires private employers to pay accrued vacation at the time of termination. However, state employees must take earned vacation leave in a lump sum when they leave state employment for any reason, including termination for cause.
Tennessee
Final earned wages include vacation pay, when vacation pay is owed an employee under a company policy or employment agreement.
Texas
Paid time off (PTO) and paid days off (PDO) are included in the definition of “wages” unless the employer’s written policy defines PTO or PDO as something other than a combination of vacation pay, holiday pay, sick leave pay, parental leave pay, or severance pay. PTO or PDO is payable to employees upon separation from employment only if there is a written agreement with the employer or the employer has a written policy that specifically provides for such payments.
Utah
Final wages include vacation pay that is due an employee under a company policy or employment agreement.
Vermont
An employer does not have to pay an employee for earned but unused vacation upon termination unless the employer has provided the employee with a written statement agreeing to pay for earned but unused time.
Virginia
If an employer agrees to provide vacation pay and the employee performs work on reliance of that promise, the employee may be entitled to benefits as a matter of contract law.
Washington
Final wages include vacation pay that is due an employee under a company policy.
West Virginia
The full amount of wages, which includes accrued vacation time, must be paid on termination.
Wisconsin
Final wages include vacation pay, when an employer provides vacation pay under a company policy or employment agreement.
Wyoming
No provision requires the payment of accrued vacation at the time of termination. However, the Wyoming attorney general has determined that “vacation pay” is “additional” or “deferred wages” and must be paid to the employee at separation if there exists an agreement between the employer and employee that provides for vacation pay; the agreement specifies a definite time period of employment before such pay is earned; and the vacation pay must be earned.
| Ala. | None | None |
| Alas. | Next regular payday that’s at least three days after employer received notice of termination | Within three working days for employee who’s fired; next regular payday for employee who’s laid off |
| Ariz. | Next payday | Earlier of next payday or within three working days |
| Ark. | None | Within seven days |
| Calif. | Within three days or at once if worker gave three days’ notice | At once |
| Colo. | Next payday | At once |
| Conn. | Next payday | Next business day for employee who’s fired; next regular payday for employee who’s laid off |
| Del. | Next payday | Next payday |
| D.C. | Earlier of next payday or within seven days | Next workday |
| Fla. | None | None |
| Ga. | None | None |
| Haw. | Next payday or at once if worker gave pay period’s notice | At once for employee who’s fired; next regular payday for employee who’s laid off |
| Ida. | Earliest of next payday, 10 days, or within 48 hours of employee’s written request for final pay | Earliest of next payday, 10 days, or within 48 hours of employee’s written request for final pay |
| Ill. | At once or next payday | At once or next payday |
| Ind. | Next payday | Payday in the pay period in which the termination occurs |
| Iowa | None | Next payday |
| Kan. | Next payday | Next payday |
| Ky. | Later of next payday or 14 days | Later of next payday or 14 days |
| La. | Earlier of next payday or 15 days | Earlier of next payday or 15 days |
| Me. | Earlier of next payday or two weeks after demand | Earlier of next payday or two weeks after demand |
| Md. | Next payday | Next payday |
| Mass. | Next payday | At once |
| Mich. | As soon as amount due can be determined | As soon as amount due can be determined |
| Minn. | Next payday, or second payday if first payday is less than five calendar days after employee’s last day; employee must be paid in full by the 20th day of termination | On demand |
| Miss. | None | None |
| Mo. | None | At once |
| Mont. | Earlier of next regular payday or 15 days | At once, unless employer policy extends time of payment to earlier of next regular payday or 15 days from separation |
| Neb. | Earlier of next payday or two weeks | Earlier of next payday or two weeks |
| Nev. | Earlier of next payday or seven days | At once |
| N.H. | Next payday or within three days if worker gave one pay period’s notice | Within three days for employee who’s fired; next payday for employee who’s laid off |
| N.J. | Next payday | Next payday |
| N.M. | Next payday | Within five days |
| N.Y. | Next payday | Next payday |
| N.C. | Next payday | Next payday |
| N.D. | Next payday | Next payday |
| Ohio | None | None |
| Okla. | Next payday | Next payday |
| Ore. | Estimate final pay due and pay within five days,if employee didn’t give two days’ notice and also didn’t submit time sheets; remaining final pay due within five days of the employee submitting time sheets | First business day |
| Penn. | Next payday | Next payday |
| R.I. | Next payday | Next payday |
| S.C. | Within two days or next payday | Within two days or next payday |
| S.D. | Next payday | Next payday |
| Tenn. | Later of next payday or 21 days | Later of next payday or 21 days |
| Tex. | Next payday | Within six days |
| Utah | Next payday | Within one day |
| Vt. | Next payday | Within three days |
| Va. | Next Payday | Next payday |
| Wash. | Next payday | Next payday |
| W.V. | Next payday or at once if employee gave one pay period’s notice | Within three days for employee who’s fired; next payday for employee who’s laid off |
| Wis. | Next payday | Next payday |
| Wyo. | Within five working days | Within five working days for employee who’s fired; next payday for employee who’s laid off |
