Monthly Pay Is Now Legal in Tennessee

Miller & Martin PLLC Alerts | June 19, 2017

by Stacie Caraway

For years, clients have asked us about the Tennessee Wage Payment Act and whether they could pay employees monthly “if they agreed to it” etc., because this Tennessee law expressly required bi-monthly pay – and imposed a fine ranging from $100 to $1000 per violation.

As of May 11, 2017, we can finally say “yes” to this question – even if employees don’t “agree to it”.

Effective May 11, 2017, Tennessee has amended its Wage Payment Act to expressly provide for the monthly payment of wages.

For each employer that makes wage payments once monthly to employees in private (non-governmental) employment, all wages or compensation earned and unpaid prior to the 1st day of any month shall be due and payable not later than the 5th day of the succeeding month.

So, if you wish to pay employees on a monthly basis and do not pay them by the last day of the month for which you are paying them, you would need to pay them by the 5th calendar day of the next month (by July 5 for the month of June, etc.).

For employers who continue to pay bi-monthly, Tennessee law still requires that all wages and compensation of employees in private employment shall be due and payable as follows:

(A) All wages or compensation earned and unpaid prior to the 1st day of any month shall be due and payable not later than the 20th day of the month following the one in which the wages were earned; and

(B) All wages or compensation earned and unpaid prior to the 16th day of any month shall be due and payable not later than the 5th day of the succeeding month.

The law did not change regarding a few key areas clients either may not be aware of or may have forgotten.

  1. A Posting Requirement – Every employer shall establish and maintain regular pay days as described above, and shall post and maintain notices, printed or written in plain type or script, in at least two (2) conspicuous places where the notices can be seen by the employees as they go to and from work, setting forth the regular pay days.
  2. A Vacation Pay Requirement – Tennessee employers essentially can “make their own law” or policy regarding the payout of vacation or other paid time off at termination for any reason. So, if you have said, written in a policy, or otherwise have a practice of paying out vacation or other paid time off at termination, this could bind you to have to pay out accrued but unused vacation or other paid time off to all of your employees, even though otherwise by law you are not required to do so.
  3. A Pay Deduction Requirement – We still have clients who are making payroll deductions based on employees “signing something” agreeing to the deduction. IF the deduction is going to you as the employer (rather than to an insurance company or other third party), then just having employees “sign something” is NOT following current Tennessee law.

As of July of 2011, there has been a two-step process for Tennessee employers to withhold from employee wages, again, when the deduction is being paid directly to the employer, for instance, for lost equipment or an expense the company incurred for something the employee purchased for his/her own benefit using a company credit card, etc.

This two-step process is as follows:

  1. You must first have the employee sign a document agreeing to the wage deduction before the employee incurs the debt; and
  2. Then, assuming the employee has previously signed a document agreeing to the wage deduction before incurring the debt, you must provide the employee with at least 14 calendar days’ written notice after they incur the debt that you are getting ready to take the wage deduction. This notice must state (a) the amount the employee owes you, (b) that a deduction of this amount is going to be taken from their wages as of X date(s), and (c) their right to submit a sworn affidavit to both you and the Tennessee Department of Labor and Workforce Development stating that they do not owe the stated amount within 7 calendar days of receiving this written notice.

Also, do not forget that there may be federal wage and hour law implications of making any deductions from an employee's pay.

As always, if you have questions about the new Tennessee Wage Payment Act or complying with any of these other unchanged provisions of Tennessee law (or federal law), please contact Stacie Caraway or any other member of our Labor & Employment Law Practice Group.

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