Payroll checks that are uncashed belong to the employee, regardless of how long they go unclaimed. Employers are responsible for following the escheat laws. Escheat is the reversion of abandoned property to the state. The state holds the funds until the employee or heirs claim the check. Failure to properly handle uncashed payroll checks can result in serious trouble for the employer.
Each state has escheat laws that outline the requirements for unclaimed or abandoned property. The laws require employers to turn over the funds from uncashed or claimed payroll checks to the state after a designated period of time. The state holds the funds for safekeeping until the owner or legal heirs claim possession. The amount of time an employee has to cash a check before it is considered abandoned varies among states. In New Jersey, unclaimed funds are considered abandoned after one year. Alaska and California employers are required to send payroll checks to the state's Unclaimed Property Division after three years. Hawaii does not consider property abandoned until five years have passed.
State escheat laws also may require employers to play a role in reuniting rightful owners with their property. In Florida, for example, employers are required to exercise due diligence by sending written notice to the employee's last known address prior to submitting abandoned funds to the state. The notice must contain information on how to contact the company and obtain the funds. To avoid confusion, the notice cannot contain contact information for the state.
Reserving the Funds
After a payroll check is issued, the funds do not belong to the company anymore. Even if a check is abandoned, the employer has no right to void the check. The funds from an uncashed payroll check should never be returned to the company's payroll checking account. Employers must keep the funds available to pay the employee or to submit to the state. Not having the available funds to cover the payroll check is a breach of fiduciary responsibility. The court can take action and even file criminal charges against the employer.
Claiming the Property
There is no statute of imitations on claiming abandoned property. All states have a website that allows people to search the database for unclaimed funds. There is no need to hire a third-party company to reclaim property. The rightful owner simply needs to verify ownership by answering a few questions and providing proof of identity.
- U.S. Securities and Exchange: Accounts – Abandoned or Unclaimed
- Center for Abandoned Assets Recovery: State Specific Unclaimed Property Information
- Mark Kantrowitz: The Unclaimed Property Page
- Payroll on a Budget: Unclaimed Payroll Check
- Florida Department of Financial Services: Florida Unclaimed Property Reporting Instructions Manual
Jeannine Mancini, a Florida native, has been writing business and personal finance articles since 2003. Her articles have been published in the Florida Today and Orlando Sentinel. She earned a Bachelor of Science in Interdisciplinary Studies from the University of Central Florida.