What should we do when employees don't cash their paychecks?

Employers are required to turn over unclaimed wages to the state under unclaimed property or escheat laws. All 50 states have provisions regarding how to treat unclaimed property, and the requirements are very similar in one regard—how to determine if the property, in this case the paycheck, is abandoned and when to report this information to the state. There are four elements to consider:

• Does the property have value?
• Is the owner of the paycheck unable to be located?
• Has the paycheck been unclaimed for the period of time set by the state law or the "abandonment period"?
• Is there a legal obligation of the "holder" (employer) to the "owner" (employee)?

Employers should ensure there are internal policies and procedures in place in the event of unclaimed wages, including by:

• Checking state regulations regarding unclaimed property to find out the "abandonment period" and the timeframe for reporting the unclaimed wages to the state.
• Trying to contact the employee or former employee by phone to discuss the paycheck(s) that were not cashed. Document any attempts your company has made to have the person collect his or her wages.
• Sending written notice to the employee's last known address (or addresses) using certified mail or other record of attempt to deliver the notice.
• Once the "abandonment period" passes, filing and reporting the unclaimed property with the appropriate state authorities.

States have increased enforcement of unclaimed property laws over the years. Most states have increased the size of the unclaimed property offices (including the number of auditors), the number of audits done and the educational programs dealing with this topic.