Deductions from Compensation:
Compilation of Responses Received from Inquiry to U.S. ELA Members
Summer 2006
Conducted by Michael Best & Friedrich LLP
Milwaukee, Wisconsin, USA
State
Arizona
Statute/Regulation &
Text of Response Email
A.R.S. 23-352 Withholding of wages
“Arizona law requires that the employer have prior
written authorization from the employee for the
withholding, unless the employer is
required/empowered to withhold by state or
federal law, or there is a reasonable good faith
dispute about the wage amount due to the
employee.”
Cal. [Lab.] Code §§ 224, 225
California
“It is generally permissible in California to [deduct
the amount owed on credit cards from an
employee’s wages] if you have a signed
authorization from the employee that gives the
employer the right to deduct the wages. I’d make
the acknowledgement as clear as possible, stating
that if the employee does not pay the bill with the
money already provided to the employee by the
employer by [specify a certain time period], and
the employer has to pay the bill, then the
employer can withhold the amount of the unpaid
bill from the employee’s next regular paycheck.”
“You can go after the employee for
reimbursement, but you cannot deduct from
wages, even if they agree to it.”
Text of Statute/Regulation
No employer may withhold or divert any portion of an employee’s wages unless
one of the following applies:
1. The employer is required or empowered to do so by state or federal law.
2. The employer has prior written authorization from the employee.
3. There is a reasonable good faith dispute as to the amount of wages due,
including the amount of any counterclaim or any claim of debt, reimbursement,
recoupment or set-off asserted by the employer against the employee.
224. The provisions of Sections 221, 222 and 223 shall in no way make it
unlawful for an employer to withhold or divert any portion of an employee's
wages when the employer is required or empowered so to do by state or federal
law or when a deduction is expressly authorized in writing by the employee to
cover insurance premiums, hospital or medical dues, or other deductions not
amounting to a
rebate or deduction from the standard wage arrived at by collective bargaining
or pursuant to wage agreement or statute, or when a deduction to cover health
and welfare or pension plan contributions is expressly authorized by a collective
bargaining or wage agreement.
225. The violation of any provision of Sections 221, 222, 222.5, or 223 is a
misdemeanor.
Conn. Gen. Stat. § 31-71e Withholding of part of
wages
Connecticut
”This is a problem in Connecticut.”
Delaware Wage Payment Act
Del. Code. Ann. tit. 19, § 1107
Delaware
“…what is proposed would be acceptable in
Delaware if there is a written agreement that is
consistent with this reg.”
Haw. Rev. Stat. § 388-6 Withholding of wages
Hawaii
“If your client has operations in Hawaii, it could
experience problems with their Hawaii employees.
State law restricts deductions from employee
checks. Deductions for items (other than
deductions required by law or court order) require
the employee to sign a written authorization. The
authorization must specify the exact amount
being deducted. Failure to comply can result in a
civil action against the employer, with liquidated
damages and attorneys fees.”
No employer may withhold or divert any portion of an employee's wages unless
(1) the employer is required or empowered to do so by state or federal law, or
(2) the employer has written authorization from the employee for deductions on
a form approved by the commissioner, or (3) the deductions are authorized by
the employee, in writing, for medical, surgical or hospital care or service, without
financial benefit to the employer and recorded in the employer's wage record
book.
No employer may withhold or divert any portion of an employee's wages unless:
(1) The employer is required or empowered to do so by state or federal law; or
(2) The deductions are for medical, surgical or hospital care or service, without
financial benefit to the employer, and are openly, clearly and in due course
recorded in the employers' books; or
(3) The employer has a signed authorization by the employee for deductions for
a lawful purpose accruing to the benefit of the employee, except that the
Department, upon finding that it is acting in the public interest, may, by
regulation, prohibit such withholding or diverting for such purpose. If the
Department abuses its discretion and acts arbitrarily and without any reasonable
ground, any aggrieved person may institute a civil action in the Superior Court to
have such regulation declared null and void. The Department, in such action,
shall not be liable for costs or fees of any nature.
No employer may deduct, retain, or otherwise require to be paid, any part or
portion of any compensation earned by any employee except where required by
federal or state statute or by court process or when such deductions or
retentions are authorized in writing by the employee, provided that the following
may not be so authorized, or required to be borne by the employee:
(1) Fines; …
(3) Fines, penalties, or replacement costs for breakage;
(4) Losses due to acceptance by an employee of checks which are
subsequently dishonored if employee is given discretion to
accept or reject any check;
(5) Losses due to defective or faulty workmanship, lost or stolen property,
damage to property, default of customer credit, or nonpayment
for goods or services received by customer if such losses are not
attributable to employee's wilfull or intentional disregard of
employer's interest; …
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Iowa Wage Payment Collection Law
Iowa Code § 91A.5 Deductions from Wages
Iowa
“A written agreement is required under Iowa
Code Chapter 91A. With an agreement in place,
this would be acceptable in Iowa.”
Division of Labor and Industry The Maryland Guide to Wage Payment and
Employment Standards Wages and Compensation - Deductions from
Wages
“In Maryland, employers may make deductions
that are expressly authorized by the employee in
a signed writing that includes the deduction
agreement only. Typically cannot take employee’s
pay below minimum wage.”
Maryland
1. An employer shall not withhold or divert any portion of an employee's wages
unless:
a. The employer is required or permitted to do so by state or federal law or by
order of a court of competent jurisdiction; or
b. The employer has written authorization from the employee to so deduct for
any lawful purpose accruing to the benefit of the employee.
Work, whether satisfactory or not, must be awarded compensation. Wage
deductions are extraordinary, and are prohibited unless:
1. A court has ordered or allowed the employer to make the deduction.
Examples include court ordered wage garnishments and orders to pay child
support.
2. The Commissioner of the Maryland Division of Labor and Industry has
allowed the deduction to offset or "pay for" something of value the employee
has received. Examples include long distance telephone calls on the employer's
business phone, personal loans, wage advances, etc.
3. Allowed by some law or regulation of the government. Examples include
state and federal taxes.
4. The employee has given express written authorization to the employer to
make the deduction. This should take the form of a separate and distinct
statement, signed by the employee, concerning only the deduction and nothing
more. Even with a proper authorization, however, employers must still pay at
least the federal minimum wage in the case of a deduction made to offset a loss
to the employer due to the admitted or court determined fault or negligence of
an employee (for example, careless damage to the employer's truck). If the
deduction is made to offset something the employee received or retained from
the employer which had monetary value (for example, personal loan, use of
long-distance telephone line, materials, etc.), the deduction may, in that case,
reduce the employee's wages below the minimum wage. Finally, an authorized
deduction may be invalid if it violates or is inconsistent with other federal or
state laws or regulations.
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Payment of Wages and Fringe Benefits Act
Mich. Comp. Laws § 408.477 Deductions from
Wages
Michigan
“The Michigan Payment of Wages and Fringe
Benefits Act requires the employee’s signed
written authorization for each withholding from
pay. I’m not sure an acknowledgment signed well
before the actual withholding (possibly a
considerable period of time prior) will suffice.”
26 Me. Rev. Stat. Ann. tit. 26, § 629 Unfair
Agreements
“To comply with Maine law, the reimbursement
for the charges on the card would need to be
characterized as a loan or advance and the
employee would need to agree to the deductions
in writing.”
Maine
(1) Except for those deductions required or expressly permitted by law or by a
collective bargaining agreement, an employer shall not deduct from the wages
of an employee, directly or indirectly, any amount including an employee
contribution to a separate segregated fund established by a corporation or labor
organization under section 55 of the Michigan campaign finance act, Act No. 388
of the Public Acts of 1976, being section 169.255 of the Michigan Compiled
Laws, without the full, free, and written consent of the employee, obtained
without intimidation or fear of discharge for refusal to permit the deduction.
(2) Except as provided in this subsection and subsection (4), a deduction for the
benefit of the employer requires written consent from the employee for each
wage payment subject to the deduction, and the cumulative amount of the
deductions shall not reduce the gross wages paid to a rate less than minimum
rate as defined in the minimum wage law of 1964, Act No. 154 of the Public Acts
of 1964, being sections 408.381 to 408.398 of the Michigan Compiled Laws. …
No person, firm or corporation shall require or permit any person as a condition
of securing or retaining employment to work without monetary compensation or
when having an agreement, verbal, written or implied that a part of such
compensation should be returned to the person, firm or corporation for any
reason other than for the payment of a loan, debt or advance made to the
person, or for the payment of any merchandise purchased from the employer or
for sick or accident benefits, or life or group insurance premiums, excluding
compensation insurance, which an employee has agreed to pay, or for rent, light
or water expense of a company-owned house or building. This section shall not
apply to work performed in agriculture or in or about a private home.
For purposes of this subchapter, the word "debt" means a benefit to the
employee. Debt does not include items incurred by the employee in the course
of the employee's work or dealing with the customers on his employer's behalf,
such as cash shortages, inventory shortages, dishonored checks, dishonored
credit cards, damages to the employer's property in any form or any
merchandise purchased by a customer.
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Minn. Stat. § 181.79 Wages Deductions for Faulty
Workmanship, Loss, Theft, or Damage
Minnesota
N.H. Rev. Stat. Ann. § 275:48 Withholding of
Wages
New
Hampshire
“Under NH law, this would need to be
characterized as a loan and there would need to
be a written agreement between the employer
and employee as to when deductions would be
made, the amounts to be deducted, and a specific
agreement as to whether or not the employer is
allowed to deduct any amount from final wages.”
Subdivision 1. Deduction requirements. No employer shall make any deduction,
directly or indirectly, from the wages due or earned by any employee, who is not
an independent contractor, for lost or stolen property, damage to property, or to
recover any other claimed indebtedness running from employee to employer,
unless the employee, after the loss has occurred or the claimed indebtedness
has arisen, voluntarily authorizes the employer in writing to make the deduction
or unless the employee is held liable in a court of competent jurisdiction for the
loss or indebtedness. Such authorization shall not be admissible as evidence in
any civil or criminal proceeding. Any authorization for a deduction shall set forth
the amount to be deducted from the employee's wages during each pay period.
A deduction may not be in excess of the amount established by law as subject to
garnishment
or execution on wages. Any agreement entered into between an employer and
an employee contrary to this section shall be void. This section shall not apply to
the following:
(a) in cases where a contrary provision in a collective bargaining agreement
exists;
(b) any rules established by an employer for employees who are commissioned
salespeople, where the rules are used for purposes of discipline, by fine or
otherwise, in cases where errors or omissions in performing their duties exist; or
(c) in cases where an employee, prior to making a purchase or loan from the
employer, voluntarily authorizes in writing that the cost of the purchase or loan
shall be deducted from the employee's wages, at regular intervals or upon
termination of employment.
I. No employer may withhold or divert any portion of an employee's wages
unless:
(a) The employer is required or empowered to do so by state or federal
law.
(b) The employer has a written authorization by the employee for
deductions for a lawful purpose accruing to the benefit of the employee as
provided in regulations issued by the commissioner or as provided in
subparagraph (d).
(c) The deductions are pursuant to any rules or regulations for medical,
surgical, or hospital care or service, without financial benefit to the employer
and openly, clearly, and in due course recorded in the employer's books.
(d) Upon an employee's written request, an employer may deduct the
following items from the employee's wages, provided that the employer shall
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N.M. Stat. § 50-4-2(B) (1978)
“New Mexico allows employers and employees to
agree upon deductions form the employee’s
paycheck.”
New Mexico
provide a written itemized accounting of such requested deductions to the
employee at least once per month:…
(3) Voluntary installment payments of legitimate loans made by the
employer to the employee as evidenced by a document that includes the
following:
(A) The time the payments will begin and end.
(B) The amounts to be deducted.
(C) A specific agreement regarding whether the employer is
allowed to deduct any amount outstanding from final wages at the termination
of employment. …
B.
Except as provided by rules of the department of finance and
administration for payment of salaries and wages to state employees, other than
employees of institutions of higher education, promulgated pursuant to Section
10-7-2 NMSA 1978, an employer shall pay wages in full, less lawful deductions
and less payroll deductions authorized by the employer and employee. Wages
shall be paid in lawful money of the United States or in checks, payroll vouchers
or drafts on banks, convertible into cash on demand at full face value or, with
the voluntary authorization of the employer, employee and financial institution,
by deposit to the account of the employee in any bank, savings and loan
association, credit union or other financial institution authorized by the United
States or one of the several states to receive deposits in the United States,
without any reduction or deduction, except as may be specifically stated in a
written contract of hiring entered into at the time of hiring. An employer shall
provide an employee with a written receipt that identifies the employer and sets
forth the employee's gross pay, the number of hours worked by the employee,
the total wages and benefits earned by the employee and an itemized listing of
all deductions withheld from the employee's gross pay. Nothing contained in
Sections 50-4-1 through 50-4-12 NMSA 1978 shall in any way limit or prohibit
the payment of wages or compensation at more frequent intervals than those
set forth in this section. Where the labor or service to be rendered to an
employer is recompensed on a task, piece or commission basis or other method
of calculating the amount of wages to be paid, other than a definite and fixed
amount in cash, the employer and the employee may agree in writing at the
time of hiring that the wages shall be paid on a monthly basis, on or before the
tenth day of the succeeding calendar month.
6
N.Y. [Lab.] Law § 193 Deductions from Wages
New York
“The arrangement as you have described it will
only be permissible, if the payment is deemed to
be ‘for the benefit of the employee.’ If the credit
card is in the employee’s name and the timely
payment will impact upon the employee’s credit I
can see a possible argument that the deduction is
for the benefit of the employee. However, if it is
a corporate card the company is ultimately
responsible for payment, I think it is doubtful that
the payment would benefit the employee.”
S.C. Code Ann. § 41-10-40 Medium of payment;
deposit of wages to employee's credit; prohibition
against deductions in absence of written notice;
time and place of payment.
South
Carolina
“This would be fine in South Carolina, so long as
you have the acknowledgement up front as to
their agreement to reimburse outstanding
amounts as an advance on wages.”
1. No employer shall make any deduction from the wages of an employee,
except deductions which:
a. are made in accordance with the provisions of any law or any rule
or regulation issued by any governmental agency; or
b. are expressly authorized in writing by the employee and are for the
benefit of the employee; provided that such authorization is kept on
file on the employer's premises. Such authorized deductions shall be
limited to payments for insurance premiums, pension or health and
welfare benefits, contributions to charitable organizations, payments
for United States bonds, payments for dues or assessments to a labor
organization, and similar payments for the benefit of the employee.
2. No employer shall make any charge against wages, or require an
employee to make any payment by separate transaction unless such charge or
payment is permitted as a deduction from wages under the provisions of
subdivision one of this section.
3. Nothing in this section shall justify noncompliance with article
three-A of the personal property law relating to assignment of earnings,
nor with any other law applicable to deductions from wages.
(A) Every employer in the State shall pay all wages due in lawful United States
money or by negotiable warrant or check bearing even date with the payday.
(B) An employer may deposit all wages due to the employee's credit at a
financial institution which is doing business in the State and is insured by an
agency of the federal government. When an employee's wages are paid by
deposit at a financial institution, he must be furnished a statement of earnings
and withholdings. Any wage deposit plan adopted by an employer shall entitle
each employee to at least one withdrawal for each deposit, free of any service
charge.
(C) An employer shall not withhold or divert any portion of an employee's wages
unless the employer is required or permitted to do so by state or federal law or
the employer has given written notification to the employee of the amount and
terms of the deductions as required by subsection (A) of Section 41-10-30.
(D) Every employer in the State shall pay all wages due at the time and place
designated as required by subsection (A) of Section 41-10-30.
7
Va. Code Ann. § 40.1-29. Time and medium of
payment; withholding wages; written statement
of earnings; agreement for forfeiture of wages;
proceedings to enforce compliance; penalties.
Virginia
“A signed authorization is sufficient in Virginia, but
the deduction should be conditioned upon the
right to use the card, which I assume is in the
employer’s name, and not on continued
employment.”
W. Va. Code Ann § 21A-5-14 Deduction of
payments from wages prohibited.
West
Virginia
C. No employer shall withhold any part of the wages or salaries of any employee
except for payroll, wage or withholding taxes or in accordance with law, without
the written and signed authorization of the employee. An employer, upon
request of his employee, shall furnish the latter a written statement of the gross
wages earned by the employee during any pay period and the amount and
purpose of any deductions there from.
An employer shall not deduct payments in whole or in part from the wages of an
individual in his employ.
“In WV, an employer may not deduct any amount
without first obtaining a valid authorization from
the employee. The WV Wage Payment and
Collection Act ahs some very specific
requirements and provides for penalties, such as
liquidated damages and attorney fees for
violations.”
Letter from the Employment Standards
Administration Wage and Hourly Division, Dated
March 10, 2006
US
Department
of Labor
“This is a response to your letter requesting an opinion regarding whether your
client may deduct from the salaries of exempt employees or require them to
reimburse the company for damage to or loss of company equipment without
jeopardizing the employees’ exempt status under the Fair Labor Standards Act
(FLSA). … It is our opinion that such deductions or reimbursements would
violate the salary basis requirement of FLSA section 13(a)(1).”
“Either approach of [making periodic deductions from employee salaries or by
requiring employees to make out of pocket reimbursements from compensation
already received] would result in employees not receiving their predetermined
salaries when due on a ‘guaranteed’ basis or ‘free and clear’ and would produce
impermissible reductions in compensation because of the quality of the work
performed under the terms of the employer’s policies, contrary to 29 C.F.R. §
541.602(a).”
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