The COVID-19 pandemic has forced many employees to work remotely, and some may have relocated for a variety of reasons, creating challenges for employers to keep up-to-date records of employee contact information.
Even after a worker's employment ends, employers still may need to contact the former employee to send final paychecks and other legally required information, such as W-2 statements. So what should employers do if these important documents are returned as undeliverable?
"The COVID-19 pandemic has certainly made it more difficult for employers," observed Marissa Mastroianni, an attorney with Cole Schotz in Hackensack, N.J. "Employers have had a tougher time keeping up with the relocation of many of their employees, especially given that many employees have moved around often during the past year."
She said employers should make all reasonable efforts to locate the former employee. "In light of this digital era, it is much easier to locate a former employee who failed to leave a correct forwarding address than it has been in the past."
Usually, employers have notice of a worker's departure date, but there are times when employees leave abruptly and haven't updated their contact information. Employers still need to provide the final paycheck with all wages due to the employee.
Under federal law, there are no express provisions governing when final wages must be paid, so employers must look to state law. Final paycheck rules vary greatly from state to state, Mastroianni noted.
Many states simply require the employer to pay final wages by the next regular payday, but other states have stricter rules and require payment within a certain number of days after an employee's last day, or even immediately on the employee's final day of work.
In some states, if an employer fails to pay a departing employee within the legal time limits, the employer may have to pay penalties, interest and any of the employee's associated legal fees.
An employer should attempt to call or e-mail the recently departed employee to confirm the employee's contact information, Mastroianni suggested. If the employee is unreachable, she said, the employer should take the following steps:
Mastroianni said the employer should document each attempt to reach the employee to serve as evidence demonstrating that it complied with the applicable final paycheck requirements.
"At the end of the day, if a paycheck is undeliverable, hold onto it and keep a record in case the employee does return for it," said Stephanie Rawitt, an attorney with Clark Hill in Philadelphia. She noted that employers should check the applicable state's regulations to determine when abandoned wages must be turned over to the state under unclaimed property laws.
Under federal law, employers must send employees their prior year's W-2 statement by Jan. 31 so employees can use the information to file their federal and state income tax returns.
What should an employer do if a former employee's statement is returned as undeliverable? "Make sure the address that the W-2 was sent to matches the last known address on record," Rawitt said. Next, employers should try to find the person through e-mail or a cell phone number.
"Keep records of all steps taken," she recommended.
Nadine Abrahams, an attorney with Jackson Lewis in Chicago, said a returned W-2 should not be removed from the envelope. "The sealed and stamped envelope is your proof that you made a good-faith effort to deliver the W-2 on time," she explained. Employers should make a copy of the stamped envelope and save it for their records, she added.
If employers make W-2s available electronically, they must give the former employee notice either by mail, by e-mail or in person. "If your attempt to provide electronic notice bounces back as undeliverable, you have 30 days to give notice via mail or in person," Abrahams noted.
According to IRS guidelines, employers are required to keep all records of employment taxes for at least four years, including employee copies of W-2s that were returned as undeliverable.
"Complying with this record-keeping requirement will be useful when a former employee comes out of the woodwork asking for a W-2 that he or she never received," Mastroianni said.
The IRS does not provide specific steps for employers to follow when a W-2 is undeliverable. But Rawitt recommended employers show that they did their due diligence to reach the employee.
When possible, Rawitt said, the employer should conduct an exit interview prior to the employee's departure and ensure it has an updated address and several other contact points, such as a personal e-mail address and a cell phone number, which are less likely to change when people move.
"Let employees know you are going to send them documents and want to make sure they receive them," Rawitt suggested. She noted that workers typically are not hiding from their former employers when they become unreachable. They just may have a lot on their minds as they deal with the challenges of the pandemic and relocation.
Mastroianni recommended that employers designate a person or department that is responsible for confirming that the contact information on file is correct for all separating employees on their last day of employment. Encourage them to reach out if anything changes, she said.
Failing to deliver W-2s by the Jan. 31 deadline and follow paycheck rules can be costly, Mastroianni noted, so employers should document all reasonable efforts made to comply with such requirements.
