Wage Deductions

Generally, the only deductions you can make from an employee's pay are for taxes or when there is a written authorization from the employee to pay things like insurance premiums, hospital or medical dues.

Your company cannot reduce an employee's pay without written authorization of the employee. This means that if an employee is terminated and had an advance against the company with a loan repayment of $50 per pay period, you cannot reduce the final paycheck by the total amount of the loan. You can only reduce the paycheck by the amount of the loan agreement.

If your company intends or seeks to make any deductions, get a written authorization from the employee beforehand. With such an authorization, the employer can deduct things like training costs (if the employee resigns in a certain period of time), unreturned uniforms (at the end of employment), and certain advanced commissions where the sale later falls through.

Your company cannot make deductions for business losses caused by employee negligence. Only if the employee was dishonest or willfully/grossly negligent can deductions be taken. Unless you know absolutely and definitively that the employee purposely damaged the business, you are best not to deduct losses from the employee's wages.

Every employment situation is different. If you are in need of discussing whether to make deductions from your employees' wages, talk to an experienced attorney here at Rothschild & Alwill to make sure you take all the necessary steps to comply with the law.