Tennessee Employers Beware—Make Sure You Are Paying Your Employees on Time

Tennessee requires employers to comply with several requirements when it comes to paying employees their wages. Most of these requirements are set out in the Tennessee wage payment statute. Employers are required to maintain regular paydays and notify employees of when these paydays are with written notices posted in at least two locations in the workplace. Employers are also required to pay employees at least twice a month. More specifically, an employer must pay all wages for the first half of the month no later than the 5th day of the following month and all wages earned in the second half of the month no later than the 20th day of the following month. Finally, an employer must pay any employee who quits or is discharged his or her final wages within 21 days of the termination date or the next regularly scheduled payday, whichever occurs later.

Why should you care? Because the statutory penalties can add up quickly. Employers who fail to pay wages on time may be charged with a class B misdemeanor, with fines from $100 to $500 or may be assessed civil penalties ranging from $500 to $1,000 at the discretion of the Commissioner of the Tennessee Department of Labor and Workforce Development. Each infraction constitutes a different offense and can subject the employer to multiple penalties. For example an employer that fails to pay an employee his or her final wages within 21 days could be subject to separate civil penalties for failing to pay final wages and failing to timely pay wages by the 5th or 20th day of the next month in which the wages were earned.

The Division of Labor Standards of the Tennessee Department of Labor and Workforce Development is responsible for enforcing the wage payment statute. The statute provides the department with the discretion not to issue a penalty when the violation was unintentional and the discretion as to the amount of the penalty depending on whether the violation was willful. Historically the department has relied on this discretion not to penalize employers that, once they are notified of a claim of failure to pay wages, promptly pay the disputed amount to the employee. Recently the department has shown an intention to change its practices and issue civil monetary penalties for technical violations of the statue in every case, even where the employer agrees to pay the employee the disputed wages.

An employer could also face an enforcement action from the department if the employer deducts monies from the employee’s final paycheck for any debt owed to the employer. The statute requires that the employee “shall be paid in full all wages and salary earned by the employee.” An employer may also face an inquiry from the federal Department of Labor under the Fair Labor Standards Act if deductions from any paycheck, including a final paycheck, take the employee’s pay below minimum wage for that pay period.

The message is simple—pay employees fully, on time, every time, including when they quit or are discharged. The wages at issue for any single pay period often will be a mere fraction of the potential civil penalties.

William S. Rutchow is a shareholder in the Nashville office of Ogletree Deakins. Republished with permission. © 2014 Ogletree Deakins. All rights reserved.