Frequency of Pay

when payday falls on a holiday

Regarding timing of wage payments, the TPL requires employers to pay non-exempt employees at least twice per month on regularly scheduled paydays, and exempt employees at least once per month (section 61.011). "Exempt" has to do with whether the employee meets the requirements for an overtime exemption as a salaried executive, administrative, or professional employee under the FLSA. Pay periods do not have to, nor do they usually, coincide exactly with the FLSA workweek used for keeping track of hours worked for overtime calculation purposes. The paydays must be posted at the employer's office and at any outlying offices where employees normally gather.

If a regular payday falls on a day that the employer is not open for business (weekend or holiday), and employees ask to be paid before the payday, employers sometimes worry that they might have to do that, especially since Section 61.013 of the Act provides that "[a]n employer shall pay an employee who is not paid on a payday for any reason, including the employee's absence on a payday, on another regular business day on the employee's request." The statutory provision is not a model of clarity, because it can be understood by some in such a way as if it requires an employer to pay an employee on a day of the employee's choosing. However, TWC does not interpret it that way, and thus adopted rule 40 T.A.C. sect; 821.22 that makes it clear that "another regular business day" means a day after the designated payday on which the employee is not paid. Here's the rationale behind that interpretation: logically, whether an employee "is not paid on a payday" cannot be ascertained until the payday has come and gone without the employee being paid. Thus, the regular business day that is acceptable as an alternative would have to be a day after the payday. Of course, the employer does not have to let itself be limited by that deadline - it can pay prior to the deadline, meaning that it could elect to pay the employees before the normal payday. The important thing, though, is that the employer does not have to pay before the payday.

Paydays may be changed, but it would be best to give employees advance written notice thereof setting out the next three paydays - 1) the last old payday; 2) the first new payday; and 3) the next-following new payday. That way, employees will not be able to credibly claim confusion, and the requirement of paying at least twice each month will be met.

Concerning a change in paydays, especially if the company wants to increase the interval between the end of a pay period and the date on which wages are paid, it would be good to give adequate advance notice of the change (as much advance notice as possible). There is no law that prescribes exactly how a change like this must be implemented. Naturally, a company would want to do it in such a way that employees' financial planning is not compromised. Otherwise, the company will get many complaints, which will take a lot of staff time to deal with. The companies that have the most success and least trouble with a change in paydays seem to be the ones that arrange for a gap-bridging paycheck as a transition from the old paydays to the new paydays. Alternatively, some companies give employees a wage advance that serves as a gap-bridger as described above - the employees all sign a deduction authorization agreement that allows the employer to deduct the wage advance from subsequent paychecks in specified installments, or from the final paycheck in a lump sum. Short of that, it is permissible on a one-time basis to have employees wait a few days for the first paycheck under the new pay schedule. That may result in some complaints, but most such complaints go away once the check is issued. Minimize complaints by giving as much advance notice as possible and advising employees to carefully plan for the transition.

The pay periods normally change when a company transitions between a biweekly and a semi-monthly pay plan. Biweekly pay plans feature two-week pay periods, while semi-monthly pay plans involve pay periods that start on specific dates and end on specific dates within each month, resulting in variable pay periods (from 13 to 16 days, depending upon the month and whether it is a leap year). With both types of pay plans, salaried exempt and salaried non-exempt employees

receive the same amount on each paycheck (with overtime as needed for non-exempt salaried employees), while the totals for hourly employees will normally vary, especially for employees paid semi-monthly, due to the variance in the number of days worked in each pay period. It is important to remember that the "workweek" for Fair Labor Standards Act purposes does not change and will not be affected by a change in paydays. The workweek is important because that is how overtime is tracked and paid. With semi-monthly pay, overtime can get a bit tricky. Overtime that occurs in a workweek that falls fully within a semi-monthly pay period must be paid with the paycheck covering that pay period, but overtime that falls into a workweek that spans two pay periods will have to be paid with the paycheck for the second of the two pay periods spanned by the overtime workweek.

Although the law requires an employer to pay wages in a timely manner on regular paydays, the question sometimes arises of what penalties might apply if an employer misses a payday, or a paycheck is not honored due to insufficient funds in an employer's account. The following considerations would apply to such situations:

There is no provision in the law assessing a specific penalty for late wage payments.

There is no Texas or federal law specifically requiring an employer to reimburse employees for bank charges caused by deposited paychecks bouncing, or by their accounts being overdrawn due to non-payment of wages. However, if such charges effectively reduce their pay below minimum wage, that would arguably violate the FLSA, and the employer could be required to reimburse enough of the fees to restore the pay to the level of minimum wage.

Practical limit: despite the lack of a specific late wage payment penalty, if late payments, or missed payments, become too numerous and result in enough wage claims to get the attention of TWC, the agency could impose a bonding requirement on the employer, meaning that the employer would have to post a bond in order to continue employing workers in Texas or doing business at all. The Attorney General could also seek an injunction in court to enforce the bonding order.

Habitual late wage payments, or failing to pay wages at all, is likely to make some employees want to quit. Turnover is expensive for everyone concerned, and if such employees file unemployment claims, TWC is likely to consider the wage payment problems to be good cause connected with the work to quit.

Employers sometimes have problems dealing with employees whose failure to keep up with required documentation impairs the company's operations. Withholding paychecks pending submission of required paperwork is almost always a violation of the timely payment provisions of the Texas Payday Law. The employees' duty to submit the required paperwork is separate from the company's duty to give the employees their paychecks by the statutory deadlines. However, if the missing paperwork relates to time worked, a delay in pay might be unavoidable:

If the company has no way of knowing how many hours the employees worked, it is not obligated to issue paychecks, because there would be nothing upon which a pay calculation could be based.

If there is a way of knowing the hours, however, the company must calculate the pay based upon what it knows, even if the employees have not technically complied with paperwork requirements.

If they turned in incomplete time sheets, the company can use the hours indicated thereon to calculate their pay. The burden would be on the employees to show evidence that they worked hours in addition to those shown on what they submitted. The extra hours could be paid with supplementary paychecks later.

If the missing paperwork is not timesheet-related, the company would have to use other means to obtain cooperation, depending upon the circumstances. It could offer an incentive, such as extra pay, or good recommendations for other jobs, or something else. To avoid future problems like this, a company might consider using a pay agreement similar to the one featured in the topic "Final Pay" in this book. A similar alternative would be to have everyone sign a wage agreement setting the pay rate at minimum wage, with a "compliance bonus" of "x" amount per hour for complete compliance with documentation and other guidelines. The "bonus" amount would be the difference between minimum wage and what the pay would normally be.


Category: Payday loans

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