Employee is Moonlighting
Q: I terminated an employee. He was moonlighting, lying to us, and was hardly spending any time at work. I plan on withholding his accrued vacation, commissions and bonus. OK?
A: The law in most states requires that you pay an employee’s “wages,” unconditionally, even if you feel that the employee did not earn those wages. “Wages” is defined very broadly, and includes salary, commissions, wage supplements, and any other benefits and fringes to which an employee is entitled. Accrued vacation pay will be included in “wages” if an employee has a right to receive that pay, and that right is often established by showing whether the employer typically compensates employees for unused vacation at termination or otherwise. You will be on thin legal ice if you deduct sums you think you are owed from an employee’s wages without the employee’s permission (and you’ll need to document that permission very carefully). The penalties for failing to promptly pay earned wages to a terminated employee can be severe — for instance, in Pennsylvania, penalties and counsel fees can be added to the amount due, and individual decision makers in a company can be held personally liable. The bottom line: don’t withhold “wages,” even if it seem like the fair thing to do, without getting the proper advice.
MEA’s goal is to provide current, detailed and useful information to HOTLINE callers, but our responses do not constitute legal advice about what you should or should not do in a particular situation. You should always consult legal counsel, in the context of a confidential attorney-client relationship, before taking any action that could have legal implications for you or your business. If legal services are needed, MEA members are entitled to a discounted fee arrangement with the Powell Trachtman law firm, which serves as MEA’s general counsel. For more information, contact Michael G. Trachtman at email@example.com.