Should You Pay an Employee Who Resigns With Two Weeks' Notice?

Should You Pay an Employee Who Resigns With Two Weeks' Notice?

An employee who resigns with two weeks' notice may think they are doing you a favor. But in fact, it can be a payroll headache, especially if you listen to some of the misinformation you may have heard about two-week notices. For example, you may have heard a rumor that you don't need to pay employees for their last two weeks of work. That's not true; as an employer, you must pay your employees for all the time they have worked. Therefore, if an employee resigns with two weeks' notice, you must pay them for any work that they complete within that two-week period. Here are some other questions you might have about this tricky situation:

Can you let the employee go early and not pay them for the two weeks?

In the vast majority of states, employment is at will, meaning employees can be terminated at any time for any reason. Therefore, unless an employment contract says otherwise, employers can typically terminate an employee before their two-week notice ends. But even if you let the employee go early, you must still pay them for any work done during those last two weeks.

Additional considerations:

  • If you let the employee go early despite their two-week notice, the termination will become involuntary, which may qualify the employee for unemployment insurance benefits that they might not have gotten otherwise.
  • If the employee gives two weeks' notice as required by company policy and you terminate them early, the employee may use the company policy to argue during litigation that they are entitled to two weeks' pay.
  • Remaining employees may view you poorly if you let employees go before their two-week notice ends. They might not see any upside to giving you two weeks' notice if they decide to resign one day.

Should you pay unused paid time off to employees who give two weeks' notice?

Yes, if a statute, your company policy or an employment contract says you should.

In some states, employers must pay out unused vacation to departing employees, regardless of whether the employee was discharged or resigned with notice.

Other states require employers to defer to company policy. Commonly, employers require departing employees to give two weeks' notice in order to receive unused vacation pay. If the employee fails to provide two weeks' notice, they will not receive the vacation payout unless a statute or an employment contract requires it.  

Generally, state law does not require employers to pay out unused sick time to departing employees. But if you provide one PTO bank instead of separately allocating vacation, sick and/or personal time, then the state may require you to pay out unused PTO upon termination.

When are final wages due to employees who give two weeks' notice?

Final wages must be paid by the state-mandated deadline. In many cases, if the employee resigned with notice, final wages are due by the next scheduled payday. State laws vary, so be sure to check your specific state regulations.

If the state is silent on the matter, you must still pay the departing employee any wages due within a reasonable time frame — usually by the next scheduled payday.

Are the rules different for exempt employees?

Employees who are exempt from overtime under the Fair Labor Standards Act must receive their full pay for any week in which they do any work — unless there's a legally permissible deduction; for example, you can legally dock an exempt employee's pay if they did not work the entire week in their first or last week of employment.

The bottom line? Get up to speed on regulations before anyone leaves so the transition goes smoothly.

Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.

Copyright © 2018 IndustryNewsletters. All rights reserved.

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