Employers’ Responsibility for Lost or Stolen Paychecks.

February 10, 2016

Topics: Employment Policies and Practices

Although many employers currently use direct deposit for relay of employee paychecks, not all employees avail themselves of that option.  In that case, the check is usually hand-delivered to the employee at work or it is mailed to their home address, especially in the case of remote employees.  In such situations, where there is a paper check, there is the possibility that it will be lost or stolen.  Employers, however, are generally not responsible for replacing the check in such situations as long as they followed the employee’s request regarding how the check was to be delivered (for example, mailing it to the correct address).

Employers would be prudent, however, to have policies addressing lost or stolen paychecks.  Such policies would include a procedure employees should follow to report lost or stolen checks, and a statement that the company will notify the bank and try to stop the check, if they are able to do so.  You can reissue the check if it can be stopped – but if the check has already been cashed, the company likely has no liability as long as it followed its usual procedure to provide the check to the employee.   The policy, however, should state that is the company is unable to stop payment on the original paycheck, the employee will be responsible for the loss.

Employers should also be aware of any state or local laws that might impose other obligations regarding employee paychecks.  You should note, however, that a number of states preclude employers from mandating direct deposit but can only offer it as an option employees may choose.  For that reason, a company in such a location cannot institute mandatory direct deposit in an effort to avoid having to deal with lost or stolen checks.  Be aware of the laws that apply to your company to ensure you are compliant.