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Deductions
An employer
can lawfully withhold amounts from an employee’s wages only:
(1) when required or empowered to do so by state or federal
law, or (2) when a deduction is expressly authorized in writing
by the employee to cover insurance premiums, benefit plan contributions
or other deductions not amounting to a rebate on the employee’s
wages, or (3) when a deduction to cover health, welfare, or
pension contributions is expressly authorized by a wage or collective
bargaining agreement. Labor
Code Sections 221 and 224. Although a wage garnishment
is a lawful deduction from wages under Labor Code section 224,
an employer cannot discharge an employee because a garnishment
of wages has been threatened or if the employee’s wages have
been subjected to a garnishment for the payment of one judgment.
Labor
Code Section 2929(a) (See How
to file a discrimination complaint)
The ability of an employer to deduct amounts from an employee’s
wages due to a cash shortage, breakage, or loss of equipment
is specifically regulated by the Industrial
Welfare Commission Orders and limited by court decisions.
(Kerr’s Catering v. Department of Industrial Relations
(1962) 56 Cal.2d 319). In addition, there have been several
court decisions that significantly restrict an employer’s ability
to take an offset against an employee’s wages. Barnhill v.
Sanders (1981) 125 Cal.App.3d 1, (Balloon payment on separation
of employment to repay employee’s debt to employer is an unlawful
deduction even where the employee authorized such payment in
writing); CSEA v. State of California (1988) 198 Cal.App.3d
374 (Unlawful to deduct from current payroll for past salary
advances that were in error); Hudgins v. Nieman Marcus
(1995) 34 Cal.App.4th 1109 (Deductions for unidentified
returns from commission sales unlawful.)
Some common payroll deductions often made by employers that
are unlawful include:
Gratuities.
An employer cannot collect, take, or receive any
gratuity or part thereof given or left for an employee,
or deduct any amount from wages due an employee on account
of a gratuity given or left for an employee. Labor
Code Section 351 However, a restaurant may have
a policy allowing for tip pooling/sharing among employees
who provide direct table service to customers.
Photographs. If an employer requires a photograph
of an applicant or employee, the employer must pay the
cost of the photograph. Labor
Code Section 401
Bond. If an employer requires a bond of an
applicant or employee, the employer must pay the cost
of the bond. Labor
Code Section 401
Uniforms. If an employer requires that an
employee wear a uniform, the employer must pay the cost
of the uniform. Labor
Code Section 2802, Industrial
Welfare Commission Orders, Section 9. The term
"uniform" includes wearing apparel and accessories of
distinctive design and color.
Business Expenses. An employee is entitled
to be reimbursed by his or her employer for all expenses
or losses incurred in the direct consequence of the discharge
of the employee’s work duties. Labor
Code Section 2802
Medical or Physical Examinations. An employer
may not withhold or deduct from the wages of any employee
or require any prospective employee or applicant for employment
to pay for any pre-employment medical or physical examination
taken as a condition of employment, nor may an employer
withhold or deduct from the wages of any employee, or
require any employee to pay for any medical or physical
examination required by any federal or state law or regulation,
or local ordinance. Labor
Code Section 222.5 |
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Q-1.
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What
can my employer lawfully deduct from my wages? |
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Ans.
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Under
California law, an employer may lawfully deduct the following
from an employee’s wages:
Deductions that are
required of the employer by federal or state law, such
as income taxes or garnishments.
Deductions expressly authorized in writing by the employee
to cover insurance premiums, hospital or medical dues
or other deductions not amounting to a rebate or deduction
from the wage paid to the employee.
Deductions authorized
by a collective bargaining or wage agreement, specifically
to cover health and welfare or pension payments. |
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Q-2.
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If
I break or damage company property or lose company money
while performing my job, can my employer deduct the cost/loss
from my wages? |
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Ans.
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No,
your employer cannot legally make such a deduction from
your wages if, by reason of mistake or accident a cash
shortage, breakage, or loss of company property/equipment
occurs. The California courts have held that losses occurring
without any fault on the part of the employee or that
are merely the result of simple negligence
are inevitable in almost any business operation and thus,
the employer must bear such losses as a cost of doing
business. For example, if you accidentally drop a tray
of dishes, take a bad check, or have a customer walkout
without paying a check, your employer cannot deduct the
loss from your paycheck.
There is an exception
to the foregoing contained in the Industrial
Welfare Commission Wage Orders that purports to provide
the employer the right to deduct from an employee’s wages
for any cash shortage, breakage or loss of equipment if
the employer can show that the shortage, breakage or loss
is caused by a dishonest or willful act, or by the employee’s
gross
negligence. What this means is that a deduction may
be legal if the employer proves that the loss resulted
from the employee’s dishonesty, willfulness, or grossly
negligent act. Under this regulation, a simple accusation
does not give the employer the right to make the deduction.
The DLSE has cautioned that use of this deduction contained
in the IWC regulations may, in fact, not comply with the
provisions of the California Labor Code and various California
Court decisions. Furthermore, DLSE does not automatically
assume that an employee was dishonest, acted willfully
or was grossly negligent when an employer asserts such
as a justification for making a deduction from an employee’s
wages to cover a shortage, breakage, or loss to property
or equipment.
Labor Code Section 224 clearly prohibits any deduction
from an employee’s wages which is not either authorized
by the employee in writing or permitted by law, and any
employer who resorts to self-help does so at its own risk
as an objective test is applied to determine whether the
loss was due to dishonesty, willfulness, or a grossly
negligent act. If your employer makes such a deduction
and it is later determined that you were not guilty of
a dishonest or willful act, or grossly negligent, you
would be entitled to recover the amount of the wages withheld.
Additionally, if you no longer work for the employer who
made the deduction and it’s decided that the deduction
was wrongful, you may also be able to recover the waiting
time penalty pursuant to Labor
Code Section 203. |
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Q-3.
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What,
if anything, can my employer do if I experience shortages
in my cash drawer? |
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Ans.
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Your
employer may subject you to disciplinary action, up to
and including termination of employment. Additionally,
your employer can bring an action in court to try to recover
any damages and/or losses it has suffered. |
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Q-4.
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My
employer loaned me $500.00, and per our written agreement
was taking $50.00 from each paycheck as an installment
payment on the loan. When I quit last week my employer
deducted the outstanding loan balance of $250.00 from
my final paycheck. Is this legal? |
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Ans.
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No.
Although a California court has held that deductions for
the periodic installment payments on a loan made to an
employee by the employer are permissible when authorized
in writing by the employee, the court also concluded that
the balloon (lump sum) payment of the outstanding balance
to be made at the time the employment relationship ends
is not allowed notwithstanding the fact the employee has
given his or her written consent to such a payment. When
the employment relationship ends, your employer can only
deduct the amount of one installment payment from your
final paycheck. |
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Q-5.
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Can
my employer deduct anything from my paycheck if I come
to work late? |
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Ans.
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Yes,
your employer can deduct money from your paycheck for
coming to work late. The deduction shall not, however,
exceed the proportionate wage that would have been earned
during the time actually lost, but for a loss of time
less than 30 minutes, a half hour’s wage may be deducted.
Labor
Code Section 2928. For example, if you earn
$12.00 per hour and come to work 40 minutes late, your
employer can deduct $8.00 from your paycheck. And if you
come to work five minutes late, your employer can deduct
$6.00. |
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Q-6.
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What
can I do if my employer makes an illegal deduction from
my paycheck? |
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Ans.
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You
can either file
a wage claim with the Division of Labor Standards
Enforcement (the Labor Commissioner's Office), or file
a lawsuit in court against your employer to recover the
lost wages. Additionally, if you no longer
work for this employer, you can make a claim for the waiting
time penalty pursuant to Labor
Code Section 203. |
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Q-7.
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What
is the procedure that is followed after I file a wage
claim? |
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Ans.
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After
your claim is completed and filed with a local office
of the Division of Labor Standards Enforcement (DLSE),
it will be assigned to a Deputy Labor Commissioner who
will determine, based upon the circumstances of the claim
and information presented, how best to proceed. Initial
action taken regarding the claim can be referral to a
conference or hearing, or dismissal of the claim.
If the decision is to hold a conference, the parties will
be notified by mail of the date, time and place of the
conference. The purpose of the conference is to determine
the validity of the claim, and to see if the claim can
be resolved without a hearing. If the claim is not resolved
at the conference, the next step usually is to refer the
matter to a hearing or dismiss it for lack of evidence.
At the hearing the parties and witnesses testify under
oath, and the proceeding is recorded. After the hearing,
an Order, Decision, or Award (ODA) of the Labor Commissioner
will be served on the parties.
Either party may appeal the ODA to a civil court of competent
jurisdiction. The court will set the matter for trial,
with each party having the opportunity to present evidence
and witnesses. The evidence and testimony presented at
the Labor Commissioner’s hearing will not be the basis
for the court’s decision. In the case of an appeal by
the employer, DLSE may represent an employee who is financially
unable to afford counsel in the court proceeding.See the
Policies
and Procedures of Wage Claim Processing pamphlet for
more detail on the wage claim procedure. |
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Q-6.
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What
can I do if I prevail at the hearing and the employer
doesn’t pay or appeal the Order, Decision, or Award? |
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Ans.
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When
the Order, Decision, or Award (ODA) is in the employee's
favor and there is no appeal, and the employer does not
pay the ODA, the Division of Labor Standards Enforcement
(DLSE) will have the court enter the ODA as a judgment
against the employer. This judgment has the same force
and effect as any other money judgment entered by the
court. Consequently, you may either try to collect the
judgment yourself or you can assign it to DLSE. |
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Q-6.
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What
can I do if my employer retaliates against me because
I objected to a deduction from my wages? |
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Ans.
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If
your employer discriminates or retaliates against you
in any manner whatsoever, for example, he discharges you
because you object to what you believe to be an illegal
deduction, or because you file a claim or threaten to
file a claim with the Labor Commissioner, you can file
a discrimination/retaliation complaint with the Labor
Commissioner’s Office. In the alternative, you can file
a lawsuit in court against your employer. |
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