Can an Employee Demand Payment of Wages After Being Fired?

It is inevitable: every employer eventually has to discharge an employee. What many employers do not realize is that the discharged employee can immediately demand all wages or commissions actually earned and unpaid at the time of termination. Under Minnesota Statutes section 181.13(a), those wages and commissions are immediately due and payable upon the employee’s demand.[1] Even when you have established a biweekly, semimonthly, or monthly payroll, you have only 24 hours after that demand to pay before you are in default.[2]

The demand has a specific form. It must be in writing, though it need not state the precise amount of unpaid wages or commissions.[3] The written demand is what starts the 24-hour clock, so a casual verbal request does not trigger the deadline.

If you do not pay within that 24-hour window, you are in default, and the former employee may collect a penalty in addition to the wages owed. The penalty equals the employee’s average daily earnings, at the regular rate of pay or the rate required by law, whichever is greater, for each day up to 15 days that you remain in default.[4] It is not open-ended. The penalty is capped at a maximum of 15 days, and it stops accruing earlier upon full payment or a settlement satisfactory to the employee.[5] You can cap your exposure below 15 days simply by paying.

Two timing rules refine the general 24-hour deadline:

  • Public employers. If you are a public employer and payment of the discharged employee’s wages requires approval of a governing board, the 24-hour period does not begin until the date of the first regular or special meeting of the governing board following the discharge.[6] The flat 24-hour rule is not universal in the public sector.
  • Mailed payment. You must pay by your usual method unless the employee requests payment by mail. If you mail the wages as requested, they are treated as paid as of the postmark date, not the date the employee receives them.[7] The postmark can determine whether a mailed check beat the deadline.

What is a Wage?

The employee’s rights are not limited to hourly pay. Earned commissions,[8] vested bonuses,[9] and unused paid time off[10] can all count as wages the discharged employee may demand. On paid time off, the Minnesota Supreme Court has been explicit: “paid time off or vacation pay constitutes wages for purposes of section 181.13(a).”[11]

That threshold point is only half the analysis, and this is where employers most often go wrong. Section 181.13(a) does not itself dictate what you must pay a discharged employee for unused PTO or vacation. In Lee v. Fresenius Medical Care, Inc., the Minnesota Supreme Court held that an employer’s “liability as to vacation-pay rights is wholly contractual” and that section 181.13(a) “is a timing statute, mandating not what an employer must pay a discharged employee, but when an employer must pay a discharged employee.”[12] Whether and how much unused PTO is owed at separation is defined entirely by the employment contract or policy. The statute governs only the timing of payment for wages already earned under that agreement.

Because the obligation is contractual, you have room to define it. When you choose to offer paid time off as a benefit, you and the employee can contract for the circumstances under which the employee is entitled to paid time off and payment in lieu of paid time off, so long as the contract provisions are not prohibited by or otherwise in conflict with a statute.[13] You have considerable discretion in how and whether you compensate employees for vacation time, and you may set conditions employees must meet to exercise their earned right to paid time off.[14] That discretion is the legal basis for use-it-or-lose-it provisions, accrual caps, advance-notice requirements, and forfeiture for an employee discharged for misconduct. Accrued vacation is a contractual right to take paid time off on the policy’s terms, not an automatic cash entitlement.

Minnesota’s Earned Sick and Safe Time (ESST) law does not change this framework. The ESST statute imposes no obligation to reimburse an employee upon separation for accrued earned sick and safe time that has not been used.[15] Unused vacation and PTO remain governed by the employment contract, exactly as Lee describes.

Bonuses follow the same contract-driven logic, with an important limit. A bonus is a recoverable wage under section 181.13 only where the employee “contracts for a bonus in exchange for his services” and “the right to that bonus vests prior to the employee’s termination.”[16] A nondiscretionary bonus can qualify even before its exact dollar amount is calculated, but a purely discretionary, unvested bonus does not. So you can define when a bonus is earned. Applying Minnesota law, the Eighth Circuit held that “[t]he employment contract governs whether wages were ‘actually earned and unpaid’ for purposes of Minn. Stat. § 181.13(a),” and recognized that the employer’s policy made an employee eligible for a bonus only if she was still employed on the date bonuses were distributed.[17] Because the employee there was discharged before that date, her statutory wage claim was foreclosed: no contractual entitlement, no earned wage. (Chambers is a federal decision applying Minnesota law, persuasive rather than binding on Minnesota state courts.)

You can likewise establish when an employee has fulfilled the requirements to earn a commission. A commission is uniquely subject to an employee-employer agreement, so your commission plan or internal policy can set the conditions for earning it.[18] (Bull is an unpublished Minnesota Court of Appeals opinion. Under Minnesota Rule of Civil Appellate Procedure 136.01, subdivision 1(c), nonprecedential and unpublished opinions are not binding precedent, though they may be cited for their persuasive value. The underlying rule, that the parties’ contract governs whether a commission is earned, is well-settled Minnesota law.)

The practical lesson is direct: if you offer vacation pay, bonuses, or commissions, put an agreement in place that defines when each is earned. Failure to do so leads to uncertainty and unnecessary legal exposure.

What Can an Employer Do?

Consultation with an experienced employment attorney can minimize your exposure and keep your practices sound. Before you discharge an employee, complete an accounting and prepare a final pay statement. To limit confusion, review your policies and handbooks. If they do not define when a commission or bonus is earned, or how unused paid time off is treated, you are at risk of litigation to establish those definitions. Is a commission earned when you are paid or when the customer signs a purchase order? What benchmarks must an employee reach to earn a bonus, and has the employee met them? A simple review of a handbook can answer these questions and save the time and cost of litigation.

Tread lightly when you draft. If you draft an agreement improperly, you can unintentionally create an employment contract that alters the at-will relationship and exposes you to breach-of-contract claims. Minnesota law makes this risk concrete. An employer-drafted document such as an employee handbook can become a binding unilateral contract even when you never intended it to.[19] The Minnesota Supreme Court has explained both sides of that rule. On one hand, “[a]n employer’s general statements of policy are no more than that and do not meet the contractual requirements for an offer,”[20] so keeping handbook language to general policy statements rather than definite promises helps you avoid an accidental contract. On the other hand, “[w]hether a proposal is meant to be an offer for a unilateral contract is determined by the outward manifestations of the parties, not by their subjective intentions,”[21] so your private intent that a handbook not bind you will not save definite, offer-like language. The words on the page govern.

When you have questions, it is always best to consult an experienced employment attorney. Feel free to contact an employment attorney today with any further questions.

[1] Minn. Stat. § 181.13(a).
[2] Id.
[3] Id.
[4] Id.
[5] Id.
[6] Id.
[7] Minn. Stat. § 181.13(b).
[8] Minn. Stat. § 181.13(a).
[9] Kvidera v. Rotation Eng’g & Mfg. Co., 705 N.W.2d 416, 423 (Minn. Ct. App. 2005).
[10] Lee v. Fresenius Med. Care, Inc., 741 N.W.2d 117, 125 (Minn. 2007).
[11] Id.
[12] Id. at 123, 125.
[13] Id. at 123.
[14] Id. at 126.
[15] Minn. Stat. § 181.9448, subd. 2.
[16] Kvidera, 705 N.W.2d at 423.
[17] Chambers v. Travelers Cos., 668 F.3d 559, 566 (8th Cir. 2012).
[18] Bull v. Midwest Fin. Corp., No. C3-00-1356, 2001 WL 185031 (Minn. Ct. App. Feb. 27, 2001) (unpublished); see Minn. R. Civ. App. P. 136.01, subd. 1(c).
[19] Pine River State Bank v. Mettille, 333 N.W.2d 622, 626-27 (Minn. 1983).
[20] Id.
[21] Id.