By Jared Lewis Updated March 12, 2019
An expired payroll check can create a financial accounting problem for any company. When your employees fail to pick up their checks or fail to cash them, you may be required to take action yourself. Employers have various options for dealing with a final or stale paycheck, but once the check expires it creates additional work for the payroll department.
Timing for Issuing a Final Paycheck
Employers are required to pay employees their final paycheck upon the completion of their employment, but they are not necessarily required to do so immediately, according to the United States Department of Labor. However, the requirements in some states differ from this fairly lenient federal law. Some states require that former employees be compensated immediately, although this generally means the next payday and not necessarily the day employment ends.
Keeping Records of Unclaimed Funds
In some states, employers are required to make a record of any unclaimed funds once they have gone unclaimed for one full year. If this happens and the funds are turned over to the state, the employee or former employee will likely have to go through the appropriate state agency to claim his money.
Reissuing Expired Checks
If there is a delay in payment from the time employment is severed, former employees sometimes will not deposit their checks because of the delay in receiving them. When this happens, it is the former employee's responsibility to contact the human resources or payroll department of his previous employer. This initiates the process of reissuing a check the employee will be able to deposit. Most states have a statute of limitations on how long the employer must make the former employee's pay available to him.
Employees who still work for the employer are also entitled to their paycheck. If it is lost or destroyed, the employee should contact his company's accounting or payroll office to get a new check issued. The employer must verify that the check was never cashed, but once that is done, the employer must reissue a check.
Check Cashing after Expiry
Employees who were dismissed from their jobs may forget about their final paycheck as they seek other employment. Employees still employed with a company may forget to deposit or cash checks as well. If these employees receive a check and it gets set aside without being cashed or deposited before it expires, the employee may still be able to cash the check. Some former employees assume the expired check is no longer valid, but your bank decides whether it will cash an expired check.
Rather than going through the process of contacting the payroll department, simply try cashing the check first. According to Uniform Commercial Code § 4-404, the decision to cash the check is solely at the discretion of payee's banking institution.
Turning Unclaimed Funds Over to the State
An employer is not required to track down an employee to ensure he gets his final paycheck. Ultimately, the employee is responsible for tracking down his own pay. If the funds go unclaimed for too long, the state's statute of limitation's on unclaimed funds may expire, and the employer will no longer be obligated to pay. At that point, the employer must turn the money over to the state as unclaimed property.
The employer cannot simply pocket the unclaimed funds. The employer is, however, expected to make a reasonable number of attempts to contact the payee regarding his unclaimed or expired paycheck.
