FLSA deductions-a checklist

CHECKLIST OF FLSA DEDUCTIONS

In the following checklist of wage deductions, some deductions may be counted toward satisfying the minimum wage requirements, while others may not. Deductions are usually made for one of the following reasons:

• Meals, lodgings. Deductions from wages may be taken for the reasonable cost of meals, lodging, or other facilities provided to employees, even if the deduction would reduce the wages paid below the minimum wage rate.

• Kickbacks. All wages, whether cash or noncash, must be paid free and clear. Any arrangement that compels an employee, either directly or indirectly, to kick back a portion of compensation violates the wage requirements of the FLSA if the kickback cuts into statutorily required minimum and overtime amounts. For example, where workers were paid their gross weekly wages and then immediately had to pay back $40 for food, the food payment was a deduction from wages that reduced the pay below the minimum wage.

• Taxes. Payroll taxes assessed against the employee which the employer is required to collect may be counted as wages paid under the FLSA and deducted from an employee's pay. Taxes assessed against the employer may not be deducted. For example, only the employee's, not the employer's, share of social security taxes can be deducted.

• Tardiness. Docking for tardiness or lateness is permitted so long as additional penalties for tardiness do not result in a wage payment that is less than the applicable minimum wage.

• Benefit programs. Contributions on the part of employees to pension, health and welfare plans may be deducted from wages. If the deductions cut into statutory minimum and overtime pay, employers are permitted to make them for the benefit of third parties only if the employee voluntarily assents and if neither the employer nor anyone acting in the employer's behalf derives any profit or benefit from the transaction.

• Court orders. Deductions from wages for payments to third parties under a court order of garnishment, wage attachment, trustee process, or bankruptcy proceeding are permitted. Amounts withheld may not exceed applicable garnishment laws.

• Garnishment. The Consumer Credit Protection Act also restricts deductions from wages. Under the Act, wages are subject to garnishment to the extent of 25 percent of weekly disposable earnings or the amount by which such earnings exceed 30 times the applicable minimum wage, whichever is smaller. Garnishments are discussed further at ¶36,810 .

• Voluntary wage assignments. Deductions made under a voluntary assignment of wages by the employee can be credited against FLSA wages. Such deductions include union dues paid under a collective bargaining agreement, employee store accounts with merchants independent of the employer insurance premiums and contributions to charitable or social organizations.

• Losses. Deductions from an employee's paycheck for losses due to breakage, spills, cash register shortages and bad checks generally cannot be taken if the effect of the deduction is to reduce the employee's pay below the applicable federal or state minimum wage rate.

• Uniforms. Deductions for the cost of purchasing, renting, or maintaining a required uniform are not allowed if the effect is to reduce an employee's wage below the minimum hourly rate in any workweek. The Wage and Hour Division assumes that employees spend one hour a week cleaning their uniforms. Thus, for a minimum wage rate employee, the employer would owe the worker one additional hour's pay.

  Both employees and employers can establish different, actual costs. Further, no reimbursement is necessary for wash and wear clothing that can be washed with other personal garments.

• Overpayments. Deductions for overpayments of wages made during a prior pay period are allowed if the prior overpayment is due to a legitimate bookkeeping error, even if the deduction reduces the employee's effective wage rate for the current pay period below the minimum wage rate. The overpayment is essentially treated as a cash advance. However, if the deduction would cause the employee financial hardship, then the Wage-Hour Division urges that the repayment be spread out over a period of time.