Payroll Compliance Corner: Navigating Form I-9 and Final Paycheck Requirements

In the ever-evolving world of payroll and HR compliance, staying up to date with federal and state requirements is crucial to avoid costly penalties and legal issues. Two areas that continue to be hot spots for audits and enforcement are Form I-9 compliance and final paycheck laws. Whether you’re onboarding a new hire or processing a departing employee’s last paycheck, your processes must be airtight

In this month’s Payroll Compliance Corner, we dive deep into:

Form I-9 Compliance and Processes – What employers need to know about hiring documentation.

Final Paycheck Compliance – Understanding timing and content requirements when employees leave.

Form I-9 Compliance and Processes

What is Form I-9?

Form I-9, Employment Eligibility Verification, is a document required by the U.S. Citizenship and Immigration Services (USCIS) to verify the identity and employment authorization of individuals hired for employment in the United States.

Why It Matters

Employers must properly complete a Form I-9 for every employee hired after November 6, 1986. Non-compliance can lead to:

Civil fines (ranging from hundreds to thousands of dollars per violation)

Criminal penalties in cases of knowingly hiring unauthorized workers

Debarment from government contracts

Negative reputational impact

 

Step-by-Step I-9 Process

Step 1: Employee Completes Section 1 (By Day 1 of Work)

Must be filled out no later than the employee’s first day of employment.

Employees enter personal information and attest to their employment authorization status.

The employer should ensure that the form is completed accurately and timely.

 

Step 2: Employer Completes Section 2 (By Day 3 of Work)

It must be completed within three business days of the employee’s first day.

Employers must physically examine original documents that establish both identity and employment authorization.

Common documents include a U.S. passport, permanent resident card, driver’s license + Social Security card, etc.

Employers must record the document title, issuing authority, number, and expiration date.

 

Step 3: Reverification and Section 3 (If Applicable)

Used for updating or reverifying an employee’s work authorization if it expires.

Must be completed before the expiration date of the previously provided work authorization.

 

Best Practices for I-9 Compliance

Use the most current form – As of August 2023, the updated Form I-9 must be used.

Create a tickler system for re-verifications.

Separate I-9 forms from personnel files to streamline audits.

Perform regular internal audits to identify and correct errors.

Train HR staff thoroughly in proper form handling and compliance protocols.

Consider using E-Verify, especially if required by state law or federal contracts.

 

Final Paycheck Compliance

Why Final Paycheck Compliance Matters

• When an employee leaves your organization—voluntarily or involuntarily—failing to deliver their final paycheck in accordance with state laws can lead to:
• Wage theft claim
• Waiting time penalties (some states award up to 30 days’ wages)
• Civil litigation
• Damaged employer reputation

Key Considerations for Final Pay

Timing of Final Paychecks

The timing varies by state and by reason for separation (resignation vs. termination).

Examples:

California: Final check is due immediately upon termination; within 72 hours if the employee resigns without notice.

Texas: Final wages are due within 6 calendar days for involuntary separations; by next scheduled payday for voluntary quits.

New York: Final wages must be paid by the next regularly scheduled payday, regardless of termination type.

What Must Be Included

All earned and unpaid wages up to the termination date

Accrued and unused vacation or PTO (if state law or company policy requires payout)

Bonuses, commissions, or other earned compensation

Reimbursements for business expenses

Deductions

Employers must follow federal and state laws before deducting anything from a final paycheck.

Certain deductions (e.g., equipment not returned, uniforms) may only be made with written authorization and only if they don’t reduce the pay below minimum wage.

Best Practices for Final Pay Compliance

Know your state laws – Maintain a final paycheck compliance chart by state.

Automate triggers – Use HRIS or payroll systems to flag when someone is exiting.

Pre-calculate final wages – Prepare termination paperwork and wage calculations in advance where possible.

Provide documentation – Offer a final paystub and any breakdown of PTO, commissions, etc.

Communicate clearly – Inform the employee when and how they will receive their final pay (e.g., direct deposit, mailed check).

 

Maintaining Form I-9 and final paycheck compliance is not just about ticking boxes, it’s about building a strong foundation of trust, legal protection, and ethical employer conduct. By establishing rigorous processes, educating your team, and staying informed of federal and state-level changes, you’ll reduce risk and keep your operations running smoothly.

 

Need help navigating seasonal or remote payroll challenges?

Contact us today for a consultation—we’ll make sure your payroll runs smoothly all summer long.

 

 

 

 

Avid Payroll

Payroll@AvidPayroll.com

970-223-4913