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Terminated Employee with Negative PTO Balance

Can an employer withhold money on a non-exempt employee at termination if their PTO balance is negative?

The federal Department of Labor clearly explained in an opinion letter that an employer may deduct the amount advanced for vacation hours from an employee’s final paycheck, regardless of whether overtime hours were worked in the final week of employment or whether the deduction brings the employee’s pay below the applicable minimum wage. Employees must have been informed of the unearned vacation time policy specifically that a negative balance will be recouped from the employee’s final paycheck.

Administrative costs or interest charges cannot bring the employee below the minimum wage. Furthermore, the hourly rate of pay deducted from the final paycheck must be the rate the employee was paid at the time of the advanced paid vacation, rather than a higher rate of pay the employee may earn at the time of separation.

Keep in mind; though the deduction is permissible under the Fair Labor Standards Act (FLSA), some states have adopted their own wage and hour laws under which such deductions may not be allowed. Thus, it’s important to know applicable state legislation. Please free to post a comment on this question with the state listed and we can research applicable laws in your state.

This entry was posted on Friday, September 18th, 2015 at 9:03 pm and is filed under
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