Closing a business: set the final-pay cutoff and preserve payroll records

When you close a business, the final paycheck stops being routine and becomes the first document a wage claim will test. The law sets the deadline; the records prove you met it.

The cutoff is the legal line

Across most U.S. states, final paychecks must be paid on legally set timelines. In U.S. severance practice, the final paycheck is separate from severance and pays for work already performed through the employee's final day. A closure can create separate obligations: wages already earned and any negotiated or promised separation pay.

The final workday is the anchor. When the last shift ends before the doors lock, the cutoff is not the date the lease ends or the date the owner stops answering calls. It is the last day the employee performed work. Write that date down for each employee before the payroll run.

The final pay period follows the employer's regular schedule. A biweekly business may carry hours from the prior cycle into the last period. A weekly business may have a shorter final period. The closure date does not rewrite the pay schedule; it only ends the schedule.

State rules set how unused PTO is paid out and how the amount is calculated. Some states may penalize employers that do not reimburse separated employees for unused PTO in line with company policies. A handbook promise of payout becomes a wage item at closure.

Do not bury the PTO payout in a separate closure bonus. Label owed unused PTO as PTO. When it is not owed, say so in the separation document. The label helps the employee understand the check and helps the employer show the calculation later. Keep the note with the payroll file.

Records decide whether the claim is provable

Wash Park Grille and Agave Taco Bar closed permanently in February 2025. The Denver agency's settlement covered back pay for the 2024 holiday season, though the agency did not specify exact dates. The settlement totaled $117,244 for 56 former workers. That divided to about $2,093 per worker.

Denver Labor said Jeff Estey did not answer its information requests and said final-pay-period records were unavailable. The agency credited employees with keeping pay stubs, receipts, and tip records while ownership refused to cooperate. Missing records turn a payroll question into a damages question.

Payroll records are the employer's version of the final cutoff. They should show who worked, when, what was paid, what was owed, and when it was paid. Tip logs matter where tips are paid. Pay stubs matter everywhere. Export the data before the vendor contract ends when the system is being shut down.

A clean export should include employee names, dates worked, hours or piece rates, gross pay, deductions, net pay, and the pay date. For a payroll provider, ask for the final file before the account is closed. For spreadsheets, save a dated copy and keep the original formulas visible. Do not wait for the last employee to ask for the file. The payroll team should own the export before the closure meeting ends. A dated export gives the payroll team a clear snapshot of the final period.

The checklist keeps the claim small

Use the checklist below as the control set for a closure. Each item is a test you can run before the closure file is finalized.

• Name the final workday for each employee and write it on the final payroll file.
• Calculate the final pay period using the regular pay schedule, not the closure date alone.
• Confirm you can locate pay stubs, tip logs, and payroll records for the final period and any disputed period.
• Separate final wages from severance and unused PTO on the pay statement.
• Confirm you have the state final-pay deadline and PTO payout rule in front of you before the last check is cut.
• For a Denver closure, add the 70% damages layer used in the settlement to your back-pay estimate.

Keep the final payroll file with the closure file, and make sure the last check matches the last workday.