Timely Final Paychecks for Terminated Employees in Massachusetts
The Final Paycheck: A Strict RequirementWhen you terminate an employee, there are strict rules about the timing of the final paycheck and what it must include. For employers in Massachusetts, it is essential to understand these strict legal obligations in order to avoid legal complications and the triple damages penalty under the Massachusetts Wage Act.
Similar rules apply to final paycheck obligations if an employee quits or resigns, but you have a little more time under the law to issue the final paycheck. Final Pay Laws in Massachusetts: What Amounts Must Be PaidWhether the termination is voluntary (a resignation) or involuntary (a termination), employees must be paid the following:
Final Paycheck for a Terminated EmployeeWhen an employee is terminated in Massachusetts, employers are obligated to provide the final paycheck on the same day as the termination.
Even if the check is paid a day late, an employer could be subject to a claim under the Wage Act and still owe the employee double the amount of the total final paycheck. This comes as a surprise to many employers. Under Massachusetts law, there is no "good faith" defense to late payment of final wages, and you can face these penalties even if the payment is late due to an innocent mistake or an error in payroll processing. Final Paycheck After Quitting or ResigningIf an employee quits or resigns, the amounts you must pay them remain the same, but you have until the next regularly scheduled payroll to actually issue the check. For example, if employees are paid bi-weekly on Thursdays and someone resigns the Monday after a payroll week, their check would be due a week from Thursday of the week in which they resigned.
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Vacation Pay and PTO Payout
Vacation pay is owed at termination, unused sick time is not. This can get confusing when an employer has a combined paid time off (PTO) bank that does not make the distinction between sick time, vacation time, and personal time. The safest course in this case is to pay the unused balance in the combined bank at termination, unless you have documentation in your policies that can differentiate between sick time and vacation time.
Confusion can also occur about how vacation time is accrued. Many employers have policies that state the vacation is accrued in 1/12 increments throughout the year. For example, 10 days of vacation might accrue at .83 days each month. Policies also differ with respect to whether vacation rolls over from year to year, which can complicate the calculation of what is outstanding at termination.
There is also the special case of employers with unlimited vacation policies. On its face, there is no accrued unused vacation because employees are free to take or not take any amount of vacation throughout the year. This remains a gray area under the law, however, as some courts have decided there should be a reasonable amount of vacation time implied, and that terminated employees who took little or no vacation should still be entitled to some payment.
Whatever your vacation policy, it is important to get this number right. This is because an employee who is paid something but less than the full amount owed can still bring a claim under the Massachusetts Wage Act, and seek payment for three times the missing amount as well as their attorneys' fees and costs.
Confusion can also occur about how vacation time is accrued. Many employers have policies that state the vacation is accrued in 1/12 increments throughout the year. For example, 10 days of vacation might accrue at .83 days each month. Policies also differ with respect to whether vacation rolls over from year to year, which can complicate the calculation of what is outstanding at termination.
There is also the special case of employers with unlimited vacation policies. On its face, there is no accrued unused vacation because employees are free to take or not take any amount of vacation throughout the year. This remains a gray area under the law, however, as some courts have decided there should be a reasonable amount of vacation time implied, and that terminated employees who took little or no vacation should still be entitled to some payment.
Whatever your vacation policy, it is important to get this number right. This is because an employee who is paid something but less than the full amount owed can still bring a claim under the Massachusetts Wage Act, and seek payment for three times the missing amount as well as their attorneys' fees and costs.
Payment of Commissions at Termination
Another type of final pay that is easy to get wrong is payment of commissions, if your employees are paid any part of their compensation in commissions.
A commission is an incentive payment based on an employee's individual contribution. For example, many sales employees receive payment based on sales made, and some service provider employees may receive payments based on the number of completed services or sessions. These kinds of payments are considered wages under the Wage Act and must be paid when employment ends.
A challenge that arises is determining when a commission is earned, such that it needs to be paid at termination. The standard scenario is a sales person who earns a commission when a sale is closed, but there are other variations, including policies that state that commission is not earned until product is shipped or payment made or some other contingency.
If you are considering terminating an employee who receives commission pay, it is a good idea to consult with an employment attorney to review your commission policies and compensation practices and determine what is owed to the employee at termination under the law.
A commission is an incentive payment based on an employee's individual contribution. For example, many sales employees receive payment based on sales made, and some service provider employees may receive payments based on the number of completed services or sessions. These kinds of payments are considered wages under the Wage Act and must be paid when employment ends.
A challenge that arises is determining when a commission is earned, such that it needs to be paid at termination. The standard scenario is a sales person who earns a commission when a sale is closed, but there are other variations, including policies that state that commission is not earned until product is shipped or payment made or some other contingency.
If you are considering terminating an employee who receives commission pay, it is a good idea to consult with an employment attorney to review your commission policies and compensation practices and determine what is owed to the employee at termination under the law.
Strategies for the Unexpected
If a termination is planned, you can make planning for the final paycheck part of your overall checklist leading up to the actual termination. Sometimes, however, issues arise unexpectedly and there is a need to terminate an employee immediately. This could include serious misconduct that would harm the company or other employees if they remained employed after your discovery of the behavior.
Know that you do not have to keep someone on the job site after such misconduct in order to allow time to get the final paycheck in order. You can suspend them with pay for a few days and make the termination final when you are ready to deliver the final paycheck. You also do not have to make a separate payroll run- often employers will calculate the owed gross amount, ask the payroll service to calculate the net, and simply issue a manual check to the employee for the net amount owed.
Know that you do not have to keep someone on the job site after such misconduct in order to allow time to get the final paycheck in order. You can suspend them with pay for a few days and make the termination final when you are ready to deliver the final paycheck. You also do not have to make a separate payroll run- often employers will calculate the owed gross amount, ask the payroll service to calculate the net, and simply issue a manual check to the employee for the net amount owed.
Prioritizing Compliance
To navigate employee termination in Massachusetts successfully, employers must possess a thorough understanding of the strict requirements concerning final paychecks. Failure to meet these obligations can lead to severe financial consequences, including triple damages. It is strongly advisable for employers to seek legal counsel and establish clear procedures to ensure full compliance with the law, safeguarding the interests of both their employees and their businesses.
Meet Our Employment Lawyers
Emily Smith-Lee is the owner and founder of slnlaw. She is a 1996 graduate of Boston College Law School. She was previously a partner at the Boston office of a large international firm, where she worked for thirteen years before starting the firm that became slnlaw in 2009. She has been recognized as Massachusetts Superlawyer each year since 2013, and in 2018 earned recognition as one of Massachusetts Lawyers Weekly's Lawyers of the Year. She has written a book on employment law: Rules of the Road, What You Need to Know About Employment Laws in Massachusetts, and helped thousands of clients on both the employee and employer side with severance and non compete review and negotiation, wage and hour, discrimination and retaliation disputes, and advice about employment law generally.
Rebecca Rogers: Rebecca is a 2006 graduate of Boston College Law School, and has worked with slnlaw since 2013. She previously worked as an intellectual property litigation attorney for Fish & Richardson in Boston, Massachusetts, and clerked for the Massachusetts Supreme Judicial Court. Rebecca has helped clients with wage and hour disputes, employment discrimination and retaliation claims, review and negotiation of severance and non compete agreements, and advice to both employees and employers about navigating complex employment situations.
Jenna Ordway: Jenna is a 2013 graduate of Quinnipiac Law School, and also earned an LLM in Taxation from Boston University in 2015. She has been affiliated with slnlaw since 2011, first as a law clerk and then as an attorney. Jenna has been recognized since 2019 as a "Rising Star" by Massachusetts Superlawyers. Jenna has helped clients with review and negotiation of severance and non compete agreements, wage and hour disputes, employment and discrimination claims, and advice to small business owners about employment law and other business matters.
Elijah Bresley: Eli is a 2014 graduate of Seton Hall Law school, and has worked with slnlaw since 2020. He previously worked for a boutique employment law firm outside of Boston, and then for the Labor and Employment department of a large Boston firm. He also spent a year clerking for the judges of the Superior Court in Hartford, Connecticut. Eli has helped clients on the employee and employer side with all varieties of employment law issues, including employment discrimination, retaliation, and wage and hour issues, litigation in MCAD and state and federal courts, and advising employers about employment policies and practices.
Sharleen Tinnin: Sharleen is a 2010 graduate of Northeastern University School of Law, and has been with slnlaw since 2023. Prior to joining slnlaw, she worked with King, Tilden, McEttrick & Brink, P.C. on complex civil litigation matters. She previously worked for the United States Department of Justice, and received an "Excellence in Justice" award in 2017. Sharleen has helped clients with wage and hour, discrimination and retaliation disputes, review and negotiation of severance agreements, and litigation in MCAD and state and federal courts on employment related issues.
How We Can Help
Our expert guidance ensures that employers in Massachusetts meet strict legal requirements for providing timely final paychecks, minimizing legal risks and protecting your business. You can use the button below to schedule a call back from a member of our team, or give us a call at 781-784-2322.
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