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Jean   Murray

Employers Can't Cut Pay Without Employee Consent

By December 5, 2011

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Probably the most-commented-on article I've ever written is the one about cutting employees pay. Recently a reader wrote to ask if an employer can cut employee wages for a theft, to make the employees pay for the amount the owner lost. The answer is "NO." Employers who want to discipline employees must find a different way to do it besides withholding paychecks.

When Can Employers Cut Employee Pay?

The only way an employer can take money from employee pay is:

1. If the employee has specifically authorized the pay deduction. For example, contributions to a "flower fund" to pay for flowers for funerals, or for United Way or other charities must be approved in writing by the employee. Employees must also agree to pay deductions for benefit contributions.

The exception to this, according to the Wage and Hours Law,  is that an employer can make deductions from an employee's pay without consent for items that are "primarily for the benefit or convenience of the employer" (uniforms, for example). But these deductions cannot take the employee below minimum wage. So, for example, if an employee is making minimum wage, no deductions for uniforms could be made.

2. For income tax withholding. Every employee must complete Form W-4 at hire specifying the amount of withholding for federal taxes. For all states where the employee works which have income tax, the employee must also complete a withholding form.

3. By contract. In a union contract, for example, employee pay may be deducted for union dues, depending on the contract and state laws. The employee may have an  individual contract which authorizes certain specific deductions.

4, By a court. A court may require you to garnish employee wages for child support, non-payment of debts, or other purposes. The employee does not have to consent to this deduction.

In every case, there must be a written record in the employee's payroll file that the employee agreed to the deduction.

What about Payroll Taxes?

The only exception to the requirement for specific employee authorization is FICA taxes - Social Security and Medicare taxes. The employee portion can be deducted from employee pay without specific consent, since these deductions are required by federal law.

What If an Employer Wants to Cut Employee Pay?

Employers need to know that employees have the right to contact the state employment department or state labor board if their pay is cut without consent (except as I stated above). As an employer, you don't want the state labor people coming into your business in response to employee complaints. They will do a complete audit and may find other employment law violations. They may decide to contact federal agencies if they find federal violations. Not a pleasant picture for your business.

What about Retaliation?

And don't think about firing employees because they filed a complaint. Federal and state laws protect employees against wrongful termination.

More about keeping good payroll records on employees

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Comments
June 22, 2013 at 2:22 pm
(1) Deana Keller says:

Hi.

I was wondering under what CA LABOR CODE this would be under?

Thanks.

Deana

July 14, 2013 at 11:49 am
(2) shawn says:

I was hired by a Municipality in NY State. Terms of my employment at time of hire included health care coverage at no cost to me. 2 months after I was there, the Village Board voted to start taking money from employees to contribute to health care costs. It has been increased 3 times in the last 2 years now, and no one ever signed or consented to this deduction. I’ve heard that their plan is to increase the deduction every year. We are not union, and don’t have a labor contract. Being a Village, there is only “Village Policy” which has been amended, but no one has signed in either agreement to policy or been given a whole new policy and signed for anything. Is this legal for them to do that?

July 15, 2013 at 9:41 am
(3) biztaxlaw says:

I’m not an attorney, so i can’t give you advice. If you have agreed to participate in the plan (with a signed consent form), you don’t have much to say about the cost of the plan to employees. Employers often make changes to benefits and costs to employees, to keep their costs down. Your plan may have different levels of coverage with different costs. Your other option would be not to participate in the plan at all.

July 16, 2013 at 12:35 pm
(4) Ginger says:

I was recently terminated from a job I held for 9 months. During the time of my employment, the doctor’s wife (Mrs. A) handled payroll
(I worked for a dentist). After I worked there for 3 months, I was given the option to purchase medical ins., which I did. Mrs. A. was to take a deduction out of each paycheck to pay for ins. There were several paychecks where Mrs. A. forgot to take the deduction for ins out., and I informed the office mgr. of this. Mrs. A. told office mgr. to let me know that for the next 6 pay periods she would take out an additional $236.00 to pay for this. She never asked me to sign anything stating that I ok’d this additional deduction. I’m not saying that I didn’t owe the money. I was then terminated after the third pmt. had been made, which left 3 pmts unpaid. The very last paycheck I received, Mrs. A. took 2 payments instead of one which left me with practically no money. I believe she would have taken the last payment if I had made enough money to cover it. My question is this… was it “legal” for Mrs. D. to take these additional deductions without my signed authorization and if so, do I have any recourse to getting any of this money back. The money that I am particularly desiring to get back is $236.00 from my last paycheck where 2 pmts were taken instead of one. I reside in the state of FL.

December 25, 2013 at 8:34 pm
(5) Sheila B says:

My MIL works for an employer that has been deducting employee paychecks without their consent for items missing (dry cleaning business and customer items that leave the store never return). He has not written them up or received consent from the employees for the deduction. This has to be illegal and completely unprofessional behavior. She is afraid if she says anything she will get fired.

January 1, 2014 at 6:59 pm
(6) Renee Price says:

in May my employer needed to change Insurance due to pending Oboma Care. My premium was going to be $895 per month for my husband and myself. I declined this insurance and dropped my husband and also purchased private ins. My employer has lost the form I signed and has been taking $895 out of my check every month. The do not want to give the money back and then decided maybe give some of the money back. I want all of my money back.
I have met with HR and she stated that I should have noticed it sooner. I am at fault because I did not get nor did I ask for a copy of the signed form. Lesson learned for me. Anyway what can I do about this.
I have asked for any document giving them permission to take $895 each month. They cannot provide it becasue there is no such thing. Anyway, my nurse manager is aware and does support me 100%. HR has a very bad reputation and is pretty slack most of the time. I work in Georgia in a small hospital. The amout that they have taken is $6000 so far. And even though they know there is a problem they continue to take it out of my check.
PLEASE HELP ME!!! I want all of my money not some of it.
Labor board was not very helpful at this time.

January 4, 2014 at 8:11 am
(7) biztaxlaw says:

I understand your frustration with your situation, but I am not an attorney and I am not able to answer individual questions or comments on this article about non-payment of wages or issues with deductions. If you have an issue with non-payment of wages, you can hire an attorney to attempt to get the employer to refund your money, or you can file a complaint with your <a href=”http://www.dol.gov/dol/location.htm”>state employment office</a>.

January 27, 2014 at 4:59 pm
(8) nada says:

This article is misleading. You are discussing deductions from pay, not a pay cut. A pay cut is when a person’s compensation is reduced. ie, due to slowing of a business the employer can offer to reduce pay by $ or hours instead of laying off people. That’s a pay cut. An employer can reduce the amount of pay when the employment is “at will” at any time for any reason. The employee can either accept the pay reduction (cut) or leave.

http://www.sba.gov/community/blogs/community-blogs/business-law-advisor/know-law-when-cutting-or-reducing-employee-bene

All that is required is that notice is given of the pay cut.

February 3, 2014 at 8:18 am
(9) biztaxlaw says:

I agree this may have been misleading. The type of “pay cut” you are talking about is one that affects all employees, or a group of employees. I was talking about cutting an individual employee’s pay as a method of punishment. Thanks for the clarification.

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