|
QUESTION:
Can we pro-rate the final pay of a salaried employee working in New Hampshire whose employment we terminate in the middle of a pay period, to include only the days in the pay period before termination?
ANSWER:
The final pay of a salaried employee in New Hampshire whose employment is terminated by the employer can only be pro-rated to the number of days in the pay period before termination if the employee is terminated "for cause."
Prior to 2004, employers were only permitted to prorate salary to a daily basis for certain disciplinary suspensions, bereavement leave, FMLA leave, if the employee voluntarily requests time off without pay after exhausting all available leave granted by the employer, or if the employee was "hired after the beginning of a pay period or terminates of his own accord before the end of a pay period." In 2004, the New Hampshire Legislature added language to NH RSA 275:43-b II, allowing an employer to prorate salary to a daily basis "when a salaried employee is terminated for cause by the employer." However, what constitutes termination "for cause" is not defined in the statute, and has yet to be ruled on by the New Hampshire Supreme Court.
In Lakeshore Estates Associates LLC v. Michael F. Walsh, a case decided in 2007 by the Belknap County Superior Court, an employer appealed a decision by the New Hampshire Department of Labor that an employer did not have "cause" such that it could prorate an employee's final pay. The court noted that the employer did not have a policy defining "cause" for termination. In the absence of an employer policy, the court adopted a definition of "cause" derived from State laws governing the employment rights of public sector employees. The court held that to constitute termination "for cause" under NH RSA 275:43-b II, an employer must reasonably determine that the employee engaged in misconduct constituting reasonable grounds for termination and "the employee must have received notice, express or fairly implied, that such misconduct would be grounds for termination." Importantly for employers, the Lakeshore court also held that when reviewing whether or not a termination was "for cause" the question is not "whether the employee actually committed misconduct, but rather whether the employer reasonably determined it had cause to terminate."
In deciding whether an employee was terminated "for cause" under NH RSA 275:43-b, the New Hampshire Department of Labor (NHDOL) currently applies the standard set out in Lakeshore. In Laratonda v. Energy North Inc., decided on November 20, 2012, the claimant had been placed on a one week unpaid suspension following an incident involving another employee. Based on information that came to light during his absence, the claimant was terminated upon his return from suspension and the employer prorated his final pay. In granting the employee's wage claim, the NHDOL ruled that as the employer's written policies did not define "cause" and the written suspension notice did not state that future misconduct could result in termination, the employer had not satisfied the Lakeshore test and the employer was required to pay the employee his whole salary for his final pay period.
The Lakeshore decision does not provide a definition of what constitutes employee "misconduct" supporting termination "for cause" under NH RSA 275:43-b. Whether misconduct for purposes of a "for cause" termination under this statute can include poor performance that an employee has been warned could result in termination "for cause" remains an open question in New Hampshire.
Employers who are intent on taking advantage of the "for cause" amendment to RSA 275:43-b may be tempted to amend their employee handbooks to include a definition of "cause" for termination. Employers are reminded that such "for cause" language, unless carefully crafted, may negate the employers efforts to establish and maintain an "at will" relationship with their employees, which allows employers to terminate employees without cause (as long as doing so is not otherwise unlawful or contrary to public policy.
Please contact anyone in our practice group for advice on language to include in company personnel policies to establish the right to pro-rate a salaried employee's final pay without compromising the "at will" nature of the employment relationship.
.....
The Devine, Millimet & Branch Labor, Employment and Employee Benefits Group offers this free Friday E-Mail Alert service to provide information on recent developments in labor, employment and employee benefits law. If you have any questions about this e-mail, or if you know of anyone else who may be interested in receiving these alerts, please send us an email at employment@devinemillimet.com.
This is not a legal document nor is it intended to serve as legal advice or a legal opinion. Devine, Millimet & Branch, P.A. makes no representations that this is a complete or final description or procedure that would ensure legal compliance and does not intend that the reader should rely on it as such.
© Copyright 2012 Devine Millimet & Branch, Professional Association
|
