Can an Employer Withhold Salary Because an Employee Quits?

An employee’s salary is a fixed amount of income that constitutes all or part of her pay. Salaried employees typically receive their pay biweekly and their payment cannot be reduced due to the quality or quantity of work performed. In certain cases, such as when an employee quits, an employer can withhold salary.

The Fair Labor Standards Act, or FLSA, which sets the federal guidelines for salaried employees who are exempt from overtime pay, lists specific deductions applicable to an employee’s salary. In general, a salaried employee receives full salary even when she takes a partial day off. Under the FLSA, an employer can withhold salary if the employee does not work the entire week upon her termination.

If an employee quits without working the entire pay period, the employer can pay her for the precise amount of days worked during the pay period. For example, if she’s on a biweekly pay schedule and works Monday through Friday of the first week and only Monday of the second week, the employer should pay her for six days. Normally, she would receive payment for 10 workdays. To prorate salary, the employer divides the employee’s annual salary by the number of days in the year; the result is the employee’s daily rate.

Read More: Salary Labor Laws

Federal law does not require an employer to give an employee his final paycheck immediately upon termination, whether it’s by resignation, quitting or discharge. However, many states have final paycheck laws; an employer should consult its state labor department for its requirements. For example, the New Hampshire Department of Labor requires employers to give employees their final paycheck by the next regular payday if the employee quits or resigns, and within 72 hours of termination if he was fired.

An employer must pay all final wages and salaries due to the employee within the time frame specified by state law. If not, the employee can file a wage claim with the state labor department to recover unpaid wages. If the employer intentionally avoided paying the employee, depending on the state, the employer may be responsible for employee damages, which can amount to double back pay, a waiting time penalty, plus fines to the state.

Depending on state law, an employer can withhold salary if the employee owes the company money at the time of termination, such as overpayment wages.

Though paid vacation and sick time is not mandatory, if an employer chooses to give it, the state might also require the employer to pay the employee unused benefit days when the employee terminates. In some cases, the state requires the employer to payout accrued time per company policy. For example, if company policy says the employee must give two weeks resignation notice to receive payout of accrued vacation, the employer must pay the employee accordingly if she adheres to the policy.