Non-Exempt Employee Deductions
Question: What deductions can we take from a non-exempt employee’s paycheck?
Answer: First, make any deductions required by law such as taxes, unemployment, and Social Security. This would also include garnishments required by a legal authority such as the courts or IRS.
Any other deductions would need to be categorized as those for the employee’s benefit and those that are not. Those for the employee’s benefit include insurance premium payments and repayment of a wage advance or loan. Anything that does not meet this criteria would have to meet other standards before being legally deducted.
Under the Fair Labor Standards Act (FLSA), any deductions that are not legally-required or for the employee’s benefit must leave the non-exempt employee at least minimum wage for all hours worked and any earned overtime cannot be touched.
In addition, there are laws in several states that restrict the reasons an employer can make a deduction. For example, some allow deductions for uniforms and tools while others prohibit this practice. Some allow and others prohibit deducting for medical exams, pay advances, damages, theft, etc. You must verify the laws in the state where the employee works (not where you operate, if different) to determine what can and cannot be deducted. In states where you cannot make these deductions, you may be allowed other legal recourse but that may prove cost-prohibitive.
To prevent any confusion leading to wage-and-hour complaints, we recommend using a comprehensive Uniform / Equipment Issue / Return Form. Have the employee sign and date the form as well as initial each item and then use the form to prove they received each item and know the possible deductions.
Please contact Affinity HR Group if you have any questions about wage deductions for exempt or non-exempt employees.