Legalities of Paycheck Deductions

Some companies deduct cost from paychecks of their employers simply because they want the employees to shoulder the expenses they are supposed to utilize.  For instance, employers include a deduction on uniforms, cash shortages, tools, and others.  Is there a legal basis on this practice?

Not all deductions are legal

Some states in the U.S. do not allow companies to pass certain costs to their employers.  Meanwhile, states that allow employers to make these types of deductions are required to follow certain rules.

Paycheck deductions on uniforms

Federal law allows companies to deduct the cost of supplying and maintaining a uniform-including washing and pressing-from an employee’s paycheck.  However, the deducted cost should not fall below the minimum wage, which is US$6.55 an hour.  If an employee works on minimum wage, the employer may not require the employee to pay for a uniform through payroll deductions.

Some states have stricter laws.  New Jersey, for instance, prohibits companies from charging employees or requiring them to buy a uniform that includes a company logo or cannot be used as street wear.  Meanwhile, states like Nevada, New Hampshire, and Vermont, do not allow employers charging their employees for uniforms.

Paycheck deductions on tools and equipment

When it comes to companies supplying tools and equipment to their employees, the federal law used is just the same as for the uniforms.  Employers may require employees to pay for the tools as long as the final cost is at least equal to minimum wage.

State laws, however, may differ.  In Oregon, employers may require employees to pay for their work tools if the employee earns more than the minimum wage.  However, payroll deductions for this purpose are not allowed.  Companies in California, meanwhile, are not required to pay for job-related tools.  It is the responsibility of the employer to provide them.

Paycheck deductions on meals and lodging

Federal law allows companies to deduct the cost of providing food and lodging to their employees, even if the deducted cost is lower than the minimum wage.  However, employers may deduct cost for meal and lodging only if they are customarily provided to the employees in the industry.  Also, the employer may only deduct the reasonable cost of the provided items, not what it would charge for such items.

State laws provide legal limits for such exercise.  In California, employees must voluntarily agree to the deductions and should be put into writing.  Meanwhile, Connecticut and New Hampshire has a dollar limit on the amount an employer can deduct.

Paycheck deductions on breakage and cash register shortages

Federal law states that as long as the employee still earns at least the minimum wage after being deducted with costs covered from broken merchandise or when the cash register comes up short.

Meanwhile, many states have stricter rules.  Some require employers to get the employee’s consent, in writing, before they can deduct the cost from the employee’s paycheck.  Other states allow these deductions only if the employee assume responsibility for the loss.

California does not allow such deductions at all, unless the employer can provide proof that the employee acted dishonestly, willfully, or in a grossly negligent manner.  In their point of view, ordinary losses and shortages are part of the cost of doing business.

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