As a business owner, you are eventually going to have an employee quit someday. You may even need to fire someone. Regardless of why someone is leaving, you will have to deal with giving him or her a final paycheck within a timely manner. Every state has its own individual laws about what timeframe employers are given concerning the last check, but some employers wonder whether they are allowed to withhold money from this paycheck to cover certain expenses. The Fair Labor Standards Act (FLSA) contains some information regarding this action, so you should make sure you are withholding money legally should you choose to do so.
Deductions for Missing Property
One reason why an employer would want to withhold funds is that an employee did not return a piece of equipment that belonged to the company. For instance, a worker may have a uniform to return. There may be certain tools you provided to your workers that were not left behind, which can include hand tools, laptops and cleaning supplies. It is important to bear in mind that you cannot deduct from an employee’s paycheck to the point where he or she would technically have earned less than minimum wage. Therefore, if an employee did not return a uniform but deducting the cost would put that worker below minimum wage, you could not deduct the cost. In circumstances like this, you should try to speak with the worker to see about getting him or her to return the clothing.
Deductions for Paying Back a Debt
Some businesses have policies in place where they will provide employees with a payday advance if requested, with the expectation that the worker will repay it at some point. However, sometimes a company will give a worker an advance, and then that employee leaves or is fired for whatever reason. In these cases, you may want to deduct from the final paycheck in order to recoup the money you loaned out. Again, you cannot deduct so much to the point where the worker would make less than minimum wage. For this reason, it can be wise to have the employee sign a release form saying that it is acceptable for you to deduct.
Deductions for Damages or Cash Shortages
Sometimes you will have an employee break something valuable. If you operate a retail store, then you may discover a significant cash shortage at the end of the day. Regardless of whether the employee actually stole from the register, he or she may still be responsible because he or she was in charge of overseeing cash flow for that shift. You can deduct as long as the paycheck does not go below minimum wage. Even then, you may only be allowed to deduct if you can definitively prove that the worker in question was responsible. You may need to prove that an employee behaved in a grossly negligent or dishonest manner before withholding any money.
Each State Is Different
While the FLSA lays out some ground rules for withholding from a worker’s paycheck, some states have their own laws about what can be done. Certain states outright prohibit withholding funds from an employee, so before you take anything away from a paycheck, you need to make sure that your specific state allows it. In some cases, it may be incredibly difficult to prove that you should be allowed to withhold money.
Even if you would be completely justified in withholding money from an employee’s final paycheck, you may need to go through a few more steps before taking that action. Make sure you understand your own state’s laws in addition to the FLSA before withholding anything. You do not want to be caught on the wrong side of the law on this matter.
The content on our website is only meant to provide general information and is not legal advice. We make our best efforts to make sure the information is accurate, but we cannot guarantee it. Do not rely on the content as legal advice. For assistance with legal problems or for a legal inquiry please contact you attorney.