What happens if you issue an employee a paycheck and he or she doesn’t cash it? Most paychecks are void after 90 days, and it costs money to reissue them. Plus, it is a hassle not being able to reconcile your balance sheet because of the outstanding paychecks. Can you force the employee to sign up for direct deposit? Can you charge the employee for all of the expenses you incur because the employee can’t get around to cashing the check? What about firing the employee?
It might sound counterintuitive, but the only thing you are legally allowed to do is that last option. You cannot require an employee to sign up for direct deposit, as the Illinois Wage Payment and Collection Act prohibits employers from doing this. It also requires employers to give employees a paycheck if the employee wants it.
What about offering to pay the employee in cash? An employer can do this (although if the employee wants a paycheck the employer is required to provide one), but the Wage Payment and Collection Act also requires the employer to make this option available to every other employee. So, unless you want to give every employee cash who wants it, it probably is not a great idea to start giving one employee cash.
You also cannot deduct the costs of having to reissue checks out of the employee’s paycheck. The Wage Payment and Collection Act requires an employee to provide written consent to any deduction from his or her paycheck. It also only permits certain things to be deducted from a paycheck, none of which are fees resulting from a failure to cash it.
However, an employer is not prohibited from disciplining an employee for failing to cash a paycheck. No law makes it illegal to implement a policy requiring employees to deposit their paychecks after, say, 30 days, and then suspending or firing an employee for failing to this. It may not be a bad idea to put into place a policy saying that an employee will receive an oral warning for not cashing a paycheck after 15 days, a written warning for not cashing it after 30, a suspension for not cashing it after 45, and then will be fired for not cashing it after 60.
Say the employee never cashes the paycheck. What do you do with the money that was supposed to go to that employee? Don’t put it back into your company’s bank account! Pursuant to the Revised Unclaimed Property Act, if an employee fails to cash a paycheck within one year, the paycheck is presumed to be abandoned and it then becomes property of the State. Once this happens the employer must send a report to the State Treasurer notifying it that it is holding abandoned property and then it must mail a check for the amount of the uncashed paychecks to the Treasurer.
If you have an employee who won’t cash a paycheck, you might want to speak with him or her before doing anything. It is possible that the employee doesn’t realize why it is a problem not to cash a paycheck. If you find yourself in this odd situation, let us know and we can walk you through what you should do.