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Loans to Employees

If I gave a cash loan to one of my employees and they quit 3 weeks later can I withold their last paycheck as reimbursement of my loan. I live in MS.


Since you are in Mississippi, and the state has few employment laws, the relevant statute is the federal minimum wage law, the FLSA. (Many states would not allow this deduction.) Under the FLSA, you may be able to make this deduction if you have the employees agreement in writing, given at the time of the loan, to a repayment schedule. That agreement should include a provision to repay the entire amount out of the final paycheck if the employee is terminated.

If you do not have such a written agreement, you must still pay the employee at least $7.25 per hour for all the hours worked. The deduction for the loan cannot reduce the employees final wages below that level.

Employers who lend money to workers would be wise to get the same documentation that you would get for a car loan.

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This entry was posted on Friday, July 2nd, 2010 at 6:31 am and is filed under
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