EMPLOYMENT LAW

Delay In Payment of Employee Termination Wages Is Costly

February 2001

By Andrea K. Johnstone and Anne G. Scheer*
for New Hampshire Business Review

The failure to timely pay employees who are laid off or fired continues to be an area of confusion and liability for New Hampshire employers.

When an employee is laid off or otherwise terminated by the Company, all wages must be paid within seventy-two (72) hours. This rule also applies when an employee gives notice of her resignation and is then excused from some or all of the notice period. Ignoring this requirement can be costly.

In Hart v. Teradyne, the New Hampshire Department of Labor recently awarded liquidated damages to a laid off employee who was not paid his wages, including stock purchase and flex time cash out monies, within 72 hours. The employer was ordered to pay liquidated damages to its former employee at 10% of the unpaid wages assessed per day for each day of non-payment. Liquidated damages can be assessed up to the full amount of the wages that were untimely paid - an amount that is often not insignificant.

Employers are reminded to determine up front whether the 72 hour payment provisions of state law will be triggered by an employee termination. Consideration should also be given to what wages are due and whether it makes good business sense to pay all termination monies to the employee on his/her last day worked. Remember, wages are defined in New Hampshire as all compensation paid to an employee, including, vacation, sick and personal days, other paid time off, severance pay, and payment of employee expenses, when such benefits are a matter of employment practice or policy.

Deductions From Wages - Continued Confusion

Does your company seek to recruit and retain talent by paying tuition expenses in exchange for a commitment by the employee to stick around for a year or two? Do you advance wages, vacation or other paid time off? Are employees provided with "loans" to purchase computers and other technology? Are "personal charges" on company credit card and cellular phone bills from pay upon termination? These practices are not uncommon, however, they present a variety of New Hampshire wage and hour law compliance issues.

In Wagner v. Life Plus, Inc. the employer and employee allegedly had a verbal agreement under which the employer agreed to advance tuition assistance monies in excess of the $1,500 annual allowance set by the Company in exchange for a commitment by the employee to remain with the Company for at least one year after she earned her batchelor's degree. The employee received tuition assistance from 1996 until her resignation in 1999. The employee filed a wage claim with the New Hampshire Department of Labor seeking payment of over $4,000 which was withheld from her final pay for tuition advances and she prevailed. The DOL ruled that in order for the employer to deduct tuition advances, it was required to have the claimant sign an authorization allowing the deduction pursuant to RSA 275:48, I. Since the employer did not have a written authorization in this case, it was precluded from deduction the tuition monies it had advanced.

Employers are reminded to obtain written authorization before making any withholding from an employee's pay. Also consider whether a mere payroll withholding authorization is effective to "secure" the Company's investment. Even with a signed written authorization, most employees are unlikely to receive sufficient termination pay to repay substantial tuition advances. Employers should explore supplementing a written authorization with a promissory note or other documentation signed by the employee acknowledging receipt of the funds and their obligation to repay. Handling tuition advances with a promissory note (with or without a payroll authorization) may put the Company in a better position to pursue repayment.

Another recent NH Department of Labor case, Tucker v. Tech-PC, Inc. is also instructive. The disputed payroll withholdings in this case, involved a $500.00 loan from the employer and personal cellular phone charges. Again, the employer did not have the required written authorization to make these withholdings from wages and the employer was ordered to pay the wages wrongfully withheld to the claimant. The DOL noted that "the employer may have a cause of action in another forum to recover these loans and charges." The strength of alternative means to pursue repayment, however, may be dependent on the documentation between the parties memorializing the monies loaned and repayment terms.

The New Hampshire Department of Labor's Regulations only authorize deductions from an employee's wages when authorized in writing by the employee:

• installment payments of legitimate loans made by the employer to the employee;
• union dues;
• health, welfare pension and apprenticeship fund contributions;
• strictly voluntary contributions to charities;
• housing and utilities;
• payments into savings funds held by someone other than the employer;
• voluntary rental fees;
• voluntary cleaning of uniforms and non-required clothing;
• the employee's use of demonstrator vehicle covered by RSA 261:11, III; and,
• required clothing not covered by the definition of "uniforms" in Lab 802.14.

An employer who wishes to recoup funds from an employee for anything other than what is listed above, can not, even with the employee's authorization, legitimately withhold the money from wages.

*Anne G. Scheer is admitted in New Hampshire.

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