Payroll 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.

Although a wage garnishment is a lawful deduction from wages under California law, 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.

The employer's right to deduct amounts from an employee's wages due to a cash shortage, breakage, or loss of equipment is specifically regulated by law and limited by court decisions.  

Consult an experienced employment law attorney for examples of some common payroll deductions often made by employers that are unlawful.​

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 FAQ:

Q:  If an employee breaks or damages company property or loses company money while performing their job, can the employer deduct the cost/loss from the employee's wages?

 A:  No, the employer cannot legally make such a deduction from the employee's wages if, by reason of mistake or accident a cash shortage, breakage, or loss of company property/equipment occurs. Consult with an experience employment law attorney for an exception to this general rule. 

Q:  What, if anything, can an employer do if the employee experiences a shortage in their cash drawer?

 A:  The employer may subject the employee to disciplinary action, up to and including termination of employment. Additionally, the employer can bring an action in court to try to recover any damages and/or losses it has suffered.

Q:  An employer loans an employee money, and per a written agreement takes money from each of the employee's paycheck as an installment payment on the loan, but the employee quits before the balance owed is paid. Can the employer deduct the outstanding loan balance from the employee's final paycheck?

A:  No. 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.  However, balloon (lump sum) payments 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, the employer can only deduct the amount of one installment payment from the employee's final paycheck.
 

Q:  Can an employer deduct anything from an employee's paycheck if the employee comes to work late?

A:  Yes, the employer can deduct money from the employee's 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.
 

Q:  What action can an employee take if the employer makes an illegal deduction from the employee's paycheck?

A:  The employee 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 the employer to recover the lost wages. Additionally, if the employee no longer works for this employer, the employee can make a claim for the "waiting time penalty."
 

Q:  What is the procedure that is followed after a wage claim is filed?

A:  Consult with an experience employment law attorney after a claim is filed with the Labor Commissioner's Office on how the matter will proceed.

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Q:  What action can an employee take if the employer retaliates against the employee because they objected to a deduction from their wages?

A:  If the employer discriminates or retaliates against the employee in any manner because the employee objected to what they believed to be an illegal deduction, or because the employee filed a claim or threaten to file a claim with the Labor Commissioner, the employee can file a discrimination-complaint with the Labor Commissioner's Office or file a lawsuit in court against the employer.

If you have any questions about payroll deductions, please contact me for a FREE confidential consultation at (916) 333-4653 or Stephen_Fiegel_Esq@comcast.net.