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Aug19

Wage Deductions for Lost Equipment

Our company is headquartered in Virginia. We conduct business and have employees in MD, AL, FL, GA, WA, and Washington D.C. We would like to add a wage deduction section (which the employee will sign) to our equipment requisition form so that in the event that any loaned equipment (laptop, printer, etc.) is not returned, we can then deduct the cost out of the employee’s paycheck. Do we have to follow the guidelines and or laws for each state in which the employee lives? Is there a requirement to account for depreciation?

Employers are required to follow both federal and state wage and hour laws. When federal and state laws address the same matter, whichever law offers the most protection to the employee must be followed. Further, when an employer has employees who work out of state, the state laws in which the employee performs the majority of his/her work prevails.

The federal Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in Federal, State, and local governments.

Under the FLSA, employees are classified as either non-exempt or exempt.

Non-exempt employees must be paid for all hours worked and are subject to overtime and minimum wage requirements prescribed by the FLSA.

Conversely, exempt employees receive a fixed predetermined salary for any week during which work is performed regardless of the quantity or quality of such work. Exempt employees are excluded from overtime pay provisions.

The FLSA allows employers to make deductions from a non-exempt employee’s paycheck to recoup the cost of lost or unreturned equipment as long as the employee consents to the deduction beforehand and the deduction doesn’t reduce the employee’s hourly rate below the applicable minimum wage. Also, the deductions cannot affect an employee’s overtime pay.

Exempt employees are different. The FLSA prohibits deductions from an exempt employee’s paycheck to recoup the cost of lost or unreturned equipment. The DOL has opined that such deductions clearly violate the salary basis rule for exempt status.

Some states have adopted legislation that imposes more restrictions on wage deductions, Washington State and Washington D.C. included.

In Washington State, deductions from an employee’s paycheck to recoup the cost of lost or damaged equipment are only permissible if it can be shown to have been caused by the employee’s willful or dishonest act. Also, the incident causing the need for the deduction must have occurred in the final pay period, such a deduction is only allowed from the employee’s final paycheck, and the employer is burdened with proving the employee knew of the policy permitting the deduction (a written acknowledgement is recommended).

D.C. simply prohibits any wage deductions not required by law.

Some states adopt laws that mirror the FLSA, like Maryland.

Other states just don’t have any laws on wage deductions including Alabama, Florida and Georgia.

It’s not common for state laws to address depreciation when it comes to wage deductions. Still, it’s a fair and common practice to charge the employee the value of the equipment at the time it was lost or damaged. It’s just not good business practice to expect an employee to reimburse you the cost of a brand new product when the one he/she was using was well used.

HTH!

 

 

 

This entry was posted on Friday, August 19th, 2016 at 7:33 pm and is filed under
Compensation, Labor Laws.
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