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Employee Deductions for Expenses

If an employee damages a tool, can they be forced to pay for the repair? If a cashier is short cash in their drawer, can they be forced to repay the loss? Are employers required to spend time managing tips, ie: can employees count and divide their cash tips while working on the clock? Can an employer require employees to pay for their uniforms?

The federal Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay provisions, and compensation guidelines. Covered non-exempt workers are entitled to receive at least minimum wage per hour worked and overtime pay at a rate no less than one and one-half times their regular rate of pay for all hours worked over 40 in a given workweek.

The FLSA does not allow uniforms, or other items which are considered to be primarily for the benefit or convenience of the employer, to be included as wages. Thus, an employer may not take credit for such items in meeting obligations toward paying the minimum wage or overtime. If the wearing of a uniform is required by state law or an employer, the cost and maintenance of the uniform is usually considered to be a business expense of the employer. However, if the employer requires the employee to bear the cost, the employee’s wage may not be reduced below minimum wage nor may the cost cut into overtime compensation.

Employers must be aware that requiring employees to bear the cost of elaborate or unnecessary uniforms may be a violation under the FLSA. Also, since tipped employees often earn below minimum wage and tips belong solely to the employee, except in the case of agreed upon tipping pools, requiring tipped employees to pay for their uniforms would be unlawful.

Employers may require employees to pay for other items considered primarily for the benefit or convenience of the employer. Such items may include tools used in the employee’s work, damages to the employer’s property by the employee, financial losses due to clients/customers not paying bills, and theft of the employer’s property by the employee. The cost of such items would have the same restrictions as those mentioned above for uniforms. No deduction may be made from an employee’s wages which would reduce the employee’s earnings below the required minimum wage or overtime compensation. Even if an economic loss suffered by the employer is due to the employee’s negligence, the employee’s wages cannot be reduced below minimum wage or cut into overtime compensation.

Keep in mind that some states may have additional guidelines surrounding employee deductions for business related expenses. However, most applicable legislation is in regards to deducting the expenses from paychecks. It’s important to know any applicable state compensation laws.

There is no federal law requiring an employer to manage the tips received by employees. The management of tips is generally dependent upon the type of establishment. A quick service establishment may have a tip jar which the workers divide amongst themselves throughout the day; whereas full service establishments may require tipped employees to keep their tips and report the amount to the employer at the end of their shift. It’s up to the employer to establish such guidelines.

This entry was posted on Monday, August 11th, 2014 at 7:00 pm and is filed under
Compensation, Human Resources Management, Labor Laws.
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