Human Resource Blog

Terminated mid week - upside down on PTO

What are the statutes in both Illinois and Indiana for paying terminated associates? For example, what does the law say about paying a salaried exempt associate who is terminated mid-week and is upside down on PTO?

Under federal law, as well as state laws in Indiana and Illinois, an exempt employee need not be paid for the entire week, when they are terminated mid-week. If the employee has only worked 3 days, he or she can be paid just 3/5 of the usual weeks salary.

Both Indiana and Illinois permit employers to make deductions from an employees paycheck for loans, which is how upside down PTO is usually handled. (The thought process being that when Sally took an extra day off and was paid for it, the employer was basically loaning Sally one days salary. The loan comes due if Sally is terminated, under most company policies.) As long as the employee signed an authorization willingly, the employer can deduct any overpayment. Most employers include such an authorization when newly hired employees sign the employee handbook. Usually an authorization is also included on the form that employees sign to request PTO. Such authorization must be freely given, and not coerced. If you have such an agreement, there should be no problem withholding one days salary for each day of PTO owed.

If you do not have such written authorization, you cannot deduct money from the employees paycheck for the negative PTO balance. The company just loses it.

Suppose Sally is terminated after working 3 days this week. Sally owes 3 days of PTO, and has signed an authorization for deduction. Her employer could legitimately pay Sally nothing, because the amount Sally owes is equal to the wages she is due.

Read more about the Illinois law here: http://www.state.il.us/agency/idol/faq/qawage.htm

Read more about the Indiana law here: http://www.in.gov/dol/2345.htm