Arizona Final Paycheck Summary
Arizona final paycheck laws establish the obligation of a company to pay an employee for work performed prior to their termination. But this general obligation is subject to several laws that can significantly impact what the employer must pay. Additionally, there are legal requirements that employers must follow when terminating employees that may make it harder for employers to comply with the law.
40-603. Payment of wages: Timing; reasonable, good faith belief; good cause
A. As used in this section, "wages" has the same meaning prescribed in section 23-350.
B. An employer shall pay wages not later than the regular payday on which such wages would otherwise be due under the terms of employment. If an employer fails to tender payment on or before the regular payday, the employer shall tender the amount due within three working days of the regular payday or otherwise forfeits any right to assert as against the employee any wage claims or defenses based thereon including, but not limited to, a defense of accident, mistake or other special circumstance concerning expenditures made, benefits expected or property purchased in anticipation of payment, unless the employer can show that he or she had a reasonable good faith belief under the circumstances that the wages were not owed to the employee.
C. For the purposes of this section , with the exception of the payment of vacation pay at termination required under section 23-773, an employer shall not be in violation of this section if:
- The employee did not give the employer notice of his or her intent to separate from his or her employment and the employer has no notice of such intention.
- The employer has a good faith belief that the wages are not owed to the employee, if such belief is based solely on the employee’s noncompliance with normal procedures used to report hours worked or to call in or report for work.
- The employee resigns without notice or immediate termination.
- The employer has a good faith belief that the employee is entitled to wages other than the wages paid, if such belief appears reasonable under all of the facts.
D. Nothing in this section shall relieve an employer from complying with any provisions of any employment agreement or policy established in conjunction therewith that provides for more prompt payment of wages to employees than is provided for in this section.
E. Nothing in this section shall be construed to preclude an employee from enforcing an agreement whereby wages are payable other than on a regular payday.
Due Date of Final Paycheck
If your Arizona employer has told you that your last paycheck will be included with your final check of another type, such as a severance check, that could have a significant impact on your rights. The state of Arizona has strict requirements regarding final paychecks, and employers cannot simply decide when to issue these final checks. Instead, the regulations require that these final checks be issued in a timely manner regardless of the circumstances of your termination. The law states that if you voluntarily terminate your employment, your final paycheck is due on the next regular payday after your final day of work. If, on the other hand, you are involuntarily terminated, your employer must pay you on or before the end of the next business day after you are discharged. Intervening holidays and weekends do not count. In other words, even if you are discharged on Friday, the next regular payday (i.e. not counting holidays or weekends) may be several days away, and the employer must wait to pay you until that date.
Permitted Deductions and Withholdings
Specific laws and regulations surrounding what can and cannot be deducted (or withheld) from a final paycheck in Arizona are sparse. The law is not as clear as would be preferable. Both state and federal law require nothing to be withheld from wages, except certain taxes, for example. Payroll taxes (FICA) and unemployment taxes (Arizona unemployment tax is called the UIA tax and is required to be withheld during certain months of the year), for example, must be withheld, unless otherwise agreed upon by the employer and employee. It is important to remember that some laws require employers to withhold specific amounts from an employee’s pay for such things as wage garnishments and child support payments. Such regulations should always be adhered to in order to avoid any action on the part of both the receiving party(s) and the Court.
Most situations in which an employer is permitted to withhold amounts from an employee’s final paycheck are specifically enumerated and most of these deductions must benefit both the employer and the employee in some way, such as the employers health benefits program. The law requires all employers to notify employees of all deductions from their wages and provide a list of benefits for which such deductions are made. Essential to Arizona law, there are three (3) general categories of deductions from final paychecks:
The circumstances under which an employer would be required to return deductions that it made prior to withholding the workers final paycheck are few and far between, in that the law does not have a wide application in this regard. For the most part, the employer is not required to return any prior deducts from an employee’s wages, even if the employee claims that the amount deducted was too high or if the benefit provided in exchange was not satisfactory. Only in the most egregious cases will the employee be able to recover the difference and request repayment from his or her employer. Generally, it is in the employer’s best interest to clearly explain the reason for any deduction made.
Penalties for Employer Non-Compliance
In Arizona, an employer’s failure to comply with the state’s "timing of final paycheck" laws can lead to hefty penalties. The most significant of all being a liquidated damages award. (e) Liquidated Damages for Nonpayment of Wages. Any employer who does not pay wages as required under subsection (A), or timing of final pay requirements of § 23-353 or § 23-354, shall be liable to the employee for an amount equal to twice the wages unlawfully unpaid and interest thereon from the date of the required payment at the minimum interest rate, that is currently 10 percent, unless the employer shows that the act or omission was in good faith and that the employer had reasonable grounds for believing that the act or omission was not a violation of a wage claim. The wage claims division of the industrial commission shall assess and collect the penalties provided for in this subsection. In addition to the penalties collected pursuant to this subsection , the person who was issued a citation may bring an action in any court of competent jurisdiction to recover the full amount of the underpayment, including, if applicable, interest and the penalty provided for in this subsection. The employer has a defense in the action if the employer disputing payment is found to have: (1) reasonably believed, at the time of the withholding, that the withholding did not violate [the Minimum Wage Laws]; (2) refused to relinquish documents that constituted a waiver of the right to contest the validity of the withholding; or (3) not complied with a request by [the Division of Labor Standards Enforcement]." Additionally, the U.S. Department of Labor defines in the Code of Federal Regulation’s what it refers to as the "but for" rule. Filing an action under the "but for" rule may allow an unpaid employee to collect both double damages and attorneys fees.
What to Do if You Do Not Receive a Final Paycheck
If you do not receive your final paycheck, or if you feel that your final paycheck was less than what you should have received, then you may have a number of options. Communication with your former employer may be the easiest and fastest way to resolve the issue, and it may be worth a shot before taking legal action. Consider these steps:
Contact the Company
If you do not receive your final paycheck on time, or if you were not paid the amount agreed upon or the amount required by law, you should reach out to the company’s payroll department. Under Arizona law, employers must keep records of payments for at least three years; therefore, your former employer should have a record of the hours you worked and your final rate of pay. Explain the issue so that you are sure everyone is on the same page.
Contact the Labor Department
If there is no solution to your pay issue through your former employer, then your next move may be to contact your State Labor Department. The Arizona Industrial Commission’s Wage and Hour Division is listed as a contact point, as is the U.S. Department of Labor.
Filing a Claim
The next step, if you can come to no agreement with your employer and the Labor Department cannot solve the problem, may be to file a wage claim. For standard wage claims, please note that unpaid wages must be in the amount of $287 or more to be investigated under the Industrial Commission’s Wage Recovery Program. However, if the claim involves a request for immediate economic damages due to the violation, including but not limited to lost wages, your claim is subject to a one-year statute of limitations from the date the wages are due and payable.
Documentation
Keep copies of all your pay stubs, correspondence with your employer regarding your pay and any other relevant documentation. You will need to provide this when filing a claim.
Final Paycheck Myths in Arizona
Myth: "I have to give two weeks’ notice to get my last paycheck."
Truth: There’s no requirement to give notice to get a final paycheck. But if you’re an hourly employee, your last paycheck will be calculated in accordance with your normal hours. So if you are generally scheduled about 40 hours per week but work only 5 hours over the last three weekdays because you quit the job immediately, you will receive a paycheck based on just the 15 hours you worked and not based on the 40 hours you were scheduled.
Myth: "If you don’t provide your employer with your new address after you quit or are fired, your employer can refuse to send you your final paycheck."
Truth: An employer has ten (10) days after separation to tender a final paycheck to an employee. If that timeframe expires, it doesn’t matter whether the employee gave the employer his/her new address. The employer must still send a final paycheck to the employee.
Myth: "I am an independent contractor so I am not entitled to receive my last paycheck."
Truth: Some employers may classify employees as independent contractors simply to avoid paying unemployment insurance and other benefits. However, just because an employer classifies a worker as an independent contractor does not actually mean he/she is an independent contractor . Under Arizona law, an employer must evaluate whether he or she has the right to control the worker’s manner and means of performing the work and if so, the worker is likely an employee instead of an independent contractor. If the worker is an employee, he or she is entitled to receive a final paycheck. Each case must be evaluated in its totality.
Myth: "A temporary staffing agency is not obligated to give me a final check because I am a temporary employee."
Truth: Like all other employment-related claims, each case must be analyzed based on the specific facts. Generally, an employer must pay an employee for hours worked. However, in some situations a staffing agency may be able to argue that it’s not responsible to pay workers because a temporary agency’s liability is limited when it selects an "on-site employer." This employer issues a pay check and wields the control required of an employer. State Fund v. Superior Court of Maricopa County is a decision issued by Arizona Court of Appeals clarifying when a temporary staffing agency is liable to its workers and when it is not. While you can read our detailed analysis of State Fund v. Superior Court of Maricopa County here, we present some key issues below:
Now that you know the truth behind these myths and misconceptions, don’t let anyone discourage you from seeking legal advice! If you are owed a final paycheck, contact an experienced employment attorney immediately.