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| Is your employer making lawful deductions from your paycheck? (part 2) |
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Last week we discussed various items that may be lawfully deducted from an employee’s paycheck. Deductions are permissible if they are 1) authorized by state or federal law; 2) expressly authorized by the employee in writing; 3) expressly authorized by collective bargaining or wage agreement to cover health and welfare or pension plan contributions; and 4) deduction for “facilities” furnished in addition to wages (such as board, lodging and purchases made at a company store).However, there are several express limitations on permissible deductions. The following may provide some helpful guidelines:
1) No right of offset for employee's debts to employer – An employer is prohibited from deducting payment of a debt that an employee owed to the employer. Permitting the employer to offset the employee’s debt from the wages will allow the employer to bypass the legal system, violating the law against “prejudgment attachment.” The employer has the same recourse as all other creditors – which is to get an order from the court to have the debt paid.
However, an employee may authorize an employer to withhold some amounts owed by the employee to pay a debt to an employer. The employee must acknowledge the debt in writing. This is allowed particularly when the employee had been making periodic payments on an agreed-upon basis. But if the employee is terminated before the entire debt is paid, the employer may not “accelerate” the balance. Rather, the employer may withhold from the employee's final paycheck only the periodic amount then due.
2) No taking back of wages earned and paid – It is unlawful for an employer to collect from an employee any part of the wages that had already been earned and paid to the employee. However, the employer may take back overpayment of wages that had not been earned. Additionally, the employer and employee may agree that an employee’s final wage will be dependent on the occurrence of an event after the employee has done the work or where the employee has already received an advance payment. In such cases, the employer may set off, against future wage payments, any excess amounts previously paid. Such a system does not violate the prohibition on the employer's recapture of wages already earned or paid.
3) No chargebacks for commissions fully earned – A commission chargeback may be unlawful where the commission was fully earned at the time of a sale (that is, payment was not an advance on commissions) and the employee has not agreed in writing to the chargeback. However, an employee who receives both wages and sales commissions may agree in writing to a chargeback against commissions advanced by the employer if the sale did not proceed (for example, the customer returns the merchandise). However, the employer may not charge back commissions on returned merchandise sold by other employees or when the selling employee cannot be identified. Employees cannot be made the “insurers of the employer's business losses.”
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