Between the IRS and the Department of Labor (DOL), when making deductions from employee pay checks employers can be forgiven for feeling like the great Odysseus himself, as he wended his way between Scylla and Charybdis, taking care not to face a complete disaster. This fact is proven time and time again by the various companies which are penalized by the Wage and Hour Division of the DOL for unlawful deductions made by them to employee pay checks.
When an employer deducts wages from their employee without agreement or statutory authorization it is deemed an unlawful deduction. The confusion, and non-compliance, results from a misunderstanding of:
In some cases, employers may legally take deductions that result in the employee receiving less than the minimum stipulated wage (whichever is the highest of federal, state and municipality). However, the Fair Labor Standards Act places complex conditions on this ability, such as the employee’s exempt/non-exempt status, whether the employee has worked any overtime hours, absences that are determined in advance as not being compensated for, and other factors. Failure to properly navigate through these regulations could result in serious punishment under the FSLA.. Some states restrict wage deductions also and employers need to be aware of these details too, as workers who commute from such states will be governed by those rules.
The conditions under which deductions can or must be made include:
However, an employer cannot:
The DOL considers all the following as being for the benefit of employers and not employees:
While making deductions, the employer needs to remember the DOL stipulation that wages cannot fall below the applicable fair minimum wage. When the amount owed exceeds the stipulated minimum, the employer may spread out the deductions over a period of time, and recover what is due.
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