Terminating an employee—whether voluntary or involuntary—comes with legal and financial responsibilities for employers. While the federal Fair Labor Standards Act (FLSA) provides some guidance, the specifics often depend on your state’s laws and your organization’s policies.

Use the checklist below to help ensure compliance when ending an employee relationship.

1. Check Your State’s Final Pay Requirements

Every state sets its own rules about when final wages must be paid after termination.

• Involuntary Termination: Under the FLSA, final wages must be paid or payment initiated (e.g., ACH) within 24 hours.
• Voluntary Resignation: Many states allow payment on the next regularly scheduled payroll, but some require sooner.

 
Action: Review your state’s Department of Labor website or consult legal counsel to verify exact timing.

2. Determine PTO Payout Obligations

Does your state require employers to pay out unused paid time off (PTO)? It depends.

• Some states treat accrued PTO as earned wages and require full payout.
• Others leave it up to your company’s policy, as long as it’s clearly communicated and consistently applied.

 
Action: Review your policy manual and ensure PTO payout terms are clearly written and legally compliant.

3. Initiate Final Payment Promptly

Even if your payroll process is automated, you’re responsible for meeting deadlines.

• ACH Transfers: Must be initiated within 24 hours of termination under FLSA guidance.
• Paper Checks: Requirements may differ based on state timelines.

 
Action: Coordinate with payroll immediately to avoid delays.

4. Document Everything

From the termination conversation to the final paycheck calculation, keeping records is crucial. Include termination date, reason, final pay amount, PTO balance (if applicable), and when/how payment was issued.

Action: Store this documentation in the employee’s personnel file. 

5. Communicate Clearly

Make sure the departing employee knows:

• When and how they’ll receive their final paycheck
• Whether any PTO is being paid out
• Whom to contact with questions

 
 Action: Provide a written summary as part of their offboarding process.

Final Thoughts

Employee terminations can be complex, especially when it comes to wage laws and timing. A clear checklist—and a proactive approach—helps reduce legal risk and maintain professionalism.

Remember: Always check your state’s specific regulations to help ensure compliance.

Contact us for assistance.