Don’t Let Final Wage Payments Trip Up Your Business

A recent class action lawsuit against a national delivery service offers an important reminder for Connecticut manufacturers: timing matters when it comes to paying employees their final wages.

The case involves a seemingly minor issue—the company allegedly paid a terminated employee by direct deposit three days after termination rather than on the next business day.

That short delay is now the basis for a lawsuit seeking double damages, not just for one employee, but for an entire class of workers who may have experienced similar delays.

For manufacturers in Connecticut, where production schedules and workforce management present unique challenges, understanding these wage payment deadlines is essential.

A simple payroll misstep can quickly escalate into costly litigation.

What Connecticut Law Requires

Connecticut’s wage payment statute, specifically Section 31-71c of the Connecticut General Statutes, establishes clear and different deadlines depending on how the employment relationship ends.

When an employer discharges an employee—meaning the company initiates the termination—the employer must pay all wages owed no later than the next business day following the discharge.

This is one of the strictest timelines in the country, and it applies regardless of whether the employee worked a full shift or was terminated mid-day.

The rules differ when an employee voluntarily resigns. In those situations, the employer has until the next regular payday to issue the final paycheck.

When an employer discharges an employee, the employer must pay all wages owed no later than the next business day.

Payment can be made through the usual channels, including direct deposit if that was the employee’s chosen method, or by mail if necessary.

Layoffs and work suspensions due to labor disputes follow the resignation timeline—final wages must be paid by the next regular payday.

This distinction is critical for HR managers and plant supervisors to understand.

The deadline for terminated employees is measured in business days, not pay periods. Missing that window by even a single day can expose your company to significant liability.

The Real Cost of Getting It Wrong

As most employers already know, Connecticut takes wage payment violations seriously, and the penalties reflect that.

Under Connecticut law, employees who are not paid in accordance with the wage payment statutes can sue to recover double the amount of unpaid wages, plus costs and reasonable attorney’s fees. 

There is a potential defense available, but it is limited.

An employer can avoid double damages if it can demonstrate a good faith belief that the underpayment was in compliance with the law.

However, Connecticut courts interpret this requirement strictly. Ignorance of the law is not a defense.

Ignorance of the law is not a defense.

A good faith belief requires that the employer took active steps to learn the legal requirements and made a reasonable, informed decision that turned out to be wrong.

Simply relying on past practice or assuming that your payroll system handles compliance automatically will not satisfy this standard.

A Connecticut Superior Court case from 2017 illustrates this point well.

A restaurant owner who failed to correctly apply the tip credit to minimum wage calculations could not claim good faith because he had not taken any affirmative steps to confirm that his pay practices complied with the law.

The court emphasized that employers must do more than operate in good faith—they must actively investigate and implement proper procedures.

Practical Steps

The manufacturing environment presents unique challenges when it comes to final wage payments.

Production employees may be let go at the end of a shift with little advance planning.

Supervisors may handle terminations on the shop floor without coordinating with payroll. Shift differentials, overtime calculations, and accrued vacation time may complicate the final wage calculation.

Despite these challenges, compliance is achievable with proper planning. The most effective approach is to have a termination checklist that includes immediate coordination with your payroll department or provider.

If you know a termination is coming—whether due to performance issues, a reduction in force, or the end of a seasonal assignment—prepare the final paycheck in advance whenever possible.

For involuntary terminations, the goal should be to have the final check ready at the time of discharge or by the end of the next business day.

The most effective approach is to have a termination checklist that includes coordination with your payroll department or provider.

Consider establishing a protocol where HR or payroll is notified immediately whenever a supervisor initiates a discharge.

Many payroll systems can generate off-cycle payments, but only if someone triggers the process promptly.

Training your supervisors to understand that a termination is not complete until the final paycheck is ready can help avoid gaps in communication.

For manufacturers with multi-state operations, keep in mind that each state has its own rules.

California, for example, requires immediate payment of all wages, including certain commissions, when an employee is terminated. The penalties for noncompliance can be severe, including “waiting time” penalties that accrue for each day wages remain unpaid, up to 30 days of wages.

While Connecticut’s next-business-day rule provides a bit more flexibility, it is still one of the more demanding standards in the Northeast.

A Practical Example

Imagine a scenario that could easily occur on a typical manufacturing floor.

A quality control inspector arrives at work on a Monday morning, and the production manager decides to terminate the employee after reviewing several weeks of performance data.

The termination conversation happens at 9 am, and the employee is escorted from the building by 9:30 am.

Under Connecticut law, that employee’s final paycheck—including all wages earned through the termination date, plus any accrued vacation if your policy provides for payment—must be issued by Tuesday, the next business day.

Your payroll calendar must have flexibility built in for off-cycle payments.

If the production manager does not immediately notify HR, and HR does not communicate with payroll until Wednesday, you have already missed the deadline. Even if the check is issued on Wednesday, the employer may still find itself being challenged by a lawsuit.

Now consider how this situation multiplies if you have similar practices in place and multiple employees are affected over time. That is precisely the kind of pattern that gives rise to class action litigation.

The lawsuit against the national delivery service mentioned earlier arose from what may have been a routine payroll process—direct deposit typically runs on a fixed schedule—but that routine was out of step with the legal requirement for discharged employees.

The takeaway is that your payroll calendar must have flexibility built in for off-cycle payments, and your supervisors must understand the urgency of notifying HR immediately when a discharge occurs.

What About Resignations?

When employees resign voluntarily, the timeline is more forgiving.

You have until the next regular payday to issue the final check. However, do not assume this means you can deprioritize the matter.

Disputes often arise over the amount owed, particularly when commissions, bonuses, or accrued leave are involved.

Connecticut law addresses disputed wages separately.

If there is a disagreement over the amount owed, the employer must pay all wages that are undisputed within the required timeframe.

If there is a disagreement over the amount owed, the employer must pay all wages that are undisputed within the required timeframe.

You cannot withhold the entire final paycheck because of a dispute over a portion of it.

Doing so exposes you to liability for the undisputed portion, which can trigger double damages and attorney’s fees.

Similarly, Connecticut law prohibits employers from withholding wages as a condition of returning company property.

If an employee leaves with a company laptop or fails to return a uniform, you may have a claim for the value of that property, but you cannot deduct it from the final paycheck without proper written authorization on a form approved by the Connecticut Department of Labor.

This is a common area of confusion, and it often leads to inadvertent violations.

Avoid the Trap

The class action lawsuit referenced at the outset of this article is a cautionary tale.

A simple delay—one that may have seemed inconsequential at the time—has now become the basis for a lawsuit seeking class-wide relief.

The plaintiffs will argue that the company’s standard payroll practices failed to account for the legal requirement that discharged employees receive their wages by the next business day.

Whether that particular lawsuit succeeds is uncertain, but the lesson for manufacturers is clear.

A simple delay has now become the basis for a lawsuit seeking class-wide relief.

Review your payroll practices. Confirm that your system can handle off-cycle payments for discharges.

Train your supervisors to notify HR immediately when a termination occurs. And if you are unsure whether your practices comply with Connecticut law, consult with employment counsel before a problem arises.

Employment lawsuits are expensive, time-consuming, and distracting. Class actions even more so.

The cost of preparing a final paycheck a day earlier is negligible.

The cost of defending a wage claim—or a class action—is not.

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