Under California law, an employer has obligations to deduct certain amounts from your pay to be applied toward specific purposes. Employers, however, cannot deduct earned wages for any reason it chooses, and to do so could get them in trouble with the law. In fact, improper or otherwise unlawful deductions can lead to underpayment claims and waiting time penalties. All of which can be very costly. Employees who believe their wages have been unlawfully deducted should speak to an employment law attorney as soon as possible.
At Sirmabekian Law Firm, PC, we know you likely have immediate concerns and questions you need to be answered. Below, we address some common questions we usually hear, like:
- What is an employer in Los Angeles obligated to do with regard to payment of wages?
- What deductions can a Los Angeles employer take from your wages?
- Does an employer have to give notice of paycheck deductions?
- What deductions can't a Los Angeles employer take from your wages?
- What happens when an employee breaks company equipment or otherwise commits a costly mistake?
- Who should you contact if you believe your employer in Los Angeles improperly deducted wages from your paycheck?
We know California’s Labor Code inside and out. We also know and stay updated on the Industrial Welfare Commission’s Wage Orders. Plus, we have a deep understanding of case law as it pertains to this specific practice area. Contact us today to get answers specific to your case or to get started on your own claim.
Employers have certain obligations when it comes to your wages. They must:
- Provide a statement of wages; and
- Record payroll properly.
These two responsibilities allow you to track what the employer pays and/or deducts. It is important to pay attention to your statement of wages specifically.
STATEMENT OF WAGES
A statement of wages is really what’s known as your paystub. An employer, according to California Labor Code § 226, must provide employees certain itemized information on each payday with respect to earnings and deductions either semi-monthly or at the end of each month. This information includes:
(1) gross wages earned,
(2) total hours worked by the employee…,
(3) all deductions, given that all deductions made on written orders of the employee may be aggregated and displayed as one item,
(4) the number of piece-rate units earned as well as applicable piece rate in the case where the employee is paid on a piece-rate basis
(5) net wages earned,
(6) the inclusive dates of the period for which the employee is paid,
(7) the employee’s name and only the last four digits of his or her social security number or an identification number of each employee other than a social security number,
(8) the address and name of the legal entity which is the employer and, in the case where the employer is a farm labor contractor,… the address and name of the legal entity which secured the employer’s services, and
(9) all applicable hourly rates in effect during the period of payment and the corresponding number of hours worked at each hourly rate by the employee and, …if the employer is a temporary services employer…, the rate of pay and the total hours worked for each temporary services assignment.
Also, according to the California Labor Code § 226, an employer must keep payroll records that are accurate for a minimum of three years. These records must include an accurate accounting of wages earned and deductions taken. Employees have a right to inspect their records, too, upon a reasonable request to do so. Accordingly, the employer must maintain production records that are accurate.
According to California Labor Code § 221, it is unlawful for employers employing people in California to withhold or deduct wages from an employee’s paycheck but for certain circumstances. Section 224 of the Labor Code identifies those circumstances, which include when:
- State or federal law requires or empowers the employer to deduct wages, like for:
- Tax withholdings, or
- court orders;
- An employer expressly authorizes a deduction in writing to cover:
- benefit plan contributions,
- insurance premiums,
- medical or hospital bills, or
- other deductions not amounting to a rebate on the employee’s wages; or
- An employer expressly authorizes a deduction by a collective bargaining agreement or wage to cover:
- welfare, or
- pension contributions.
Even though employers are permitted to make the above deductions, they must still comply with federal, state, and local law. There are some limits on the amounts that can be deducted.
Also, it’s important to know that “other deductions,” as mentioned above as “other deductions not amounting to a rebate on the employee’s wages,” cannot be translated to mean any deduction for any reason. Just because an employee provides in writing that the employer can deduct a certain amount of wages does not mean it is a lawful deduction that would fall under this “other deduction” category. What the employee can authorize as “other deductions” is limited. Typically, other deductions are only those that benefit the employee rather than the employer.
That said, there is a fine line between what an employee can authorize versus what is a benefit to an employer, making your authorization unlawful. For example, you are likely allowed to authorize your employer to deduct from your paycheck food or beverages from the canteen or cafeteria. On the other hand, if you authorize the same and the employer charges a general fee for food or beverages, but you don’t eat/drink/use the cafeteria to make up for the deducted wages, then that is an unlawful deduction.
If there are permissible reasons to deduct an employee’s wages, then it seems reasonable that employees get some kind of notice of these deductions. In California, however, there is no law to address when or how an employer should give notice to an employee about deductions or reductions in an employee’s wages.
The California Department of Industrial Relations does state that employers must give notice to employees if there are changes to pay periods. But that’s it. So again, it’s important to review your pay statements or pay stubs each pay period to confirm that nothing is out of the ordinary. If a deduction looks suspicious, you should confirm you authorized it.
There are deductions allowed by federal and state law. There are also deductions that California law does not allow. Below is a summary of most of these unlawful deductions.
GRATUITIES & TIPS
California Labor Code § 351 states that an employer cannot take any of an employee’s gratuities. This also includes tips that a waiter or waitress makes, tips that a valet makes, or any other position where a person in the Los Angeles area works and is tipped or paid gratuities.
PHOTOGRAPHS & BONDS
California Labor Code § 401 prevents an employer from requiring a potential employee or a current employee to pay the cost of photographs or bonds if the employer requested it.
Industrial Welfare Commission Orders § 9 and California Labor Code § 2802 state that the cost of a uniform required to be worn by an employee must be paid by the employer unless the employee consented in writing to have the cost of the uniform deducted from the last paycheck. The latter is allowed only if the employee does not return the uniform. In this circumstance, uniform includes any apparel and accessories of distinctive design and color required by the employer.
To be applicable, a “uniform” does not necessarily include plain clothing you can purchase anywhere, like black pants and a white shirt that some restaurants may require. In the latter situation, the clothes can be purchased and worn by anyone; they are not purchased with a distinctive design that would indicate the person works for a certain company. They also do not include company-labeled clothes that are given to employees as a “gift” but are not required to wear to work. For example, during a company party, someone may win a polo shirt with the company’s logo on it — this shirt is not required attire. The employee does not have to return this shirt at the end of his or her employment.
TOOLS & EQUIPMENT
California Labor Code § 2802 and the Industrial Welfare Commission Orders, Section 9 also prevent an employer from making an employee pay for tools and equipment that he or she must use on the job.
There are two exceptions to this rule:
- Contractors, who are not employees, typically pay for their own tools and equipment; or
- Employees who earn two times the minimum wage — if the employee earns twice the amount of minimum wage, the employee can be required to purchase equipment that is customarily used in his or her specific industry.
DISCHARGE COSTS OR LOSSES
California Labor Code Section 2802 also provides that when an employer terminates or discharges an employee, that employee is not responsible for any expenses or losses incurred as a direct consequence of the discharge. Again, it’s always important to review your pay stubs and this is especially true when the pay stub is your final paycheck from the employer.
If you are a candidate for a job, the potential employer cannot require you to cover the cost of any pre-employment expenses. Pre-employment expenses typically are those related to medical or physical examinations. California Labor Code § 222.5 requires the employer to pay for these examinations, including drug tests. This is true even if a local ordinance, state law, or federal law requires the medical or physical examination before hiring the applicant to perform specific job duties.
DEBTS OR RETURNS FROM COMMISSION SALES
When an employee owes an employer money, whether due to debt, returns from commission sales, overpayment of wages, or advances made on wages, the employer must adhere to state and federal law. The employer does not have a right to self-help.
When an employer overpays an employee, it is the employer’s error. The employer cannot simply deduct the amount from an employee’s paycheck. The employee can, however, agree to pay the employer back the overpayment. If the employee does not agree, the employer can sue, and if it wins, it can garnish the employee’s wages.
When an employee owes a debt to the employer, the employee can authorize the employer to deduct payments via paychecks. There is one exception to this rule, and that exception pertains to an employee’s final paycheck. According to Barnhill v. Sanders, 125 Cal.App.3d 1 (1981), it is unlawful for an employer to deduct from the employee’s final paycheck for the debt even when that employee has authorized it. The same is true according to Ward v. Costco Wholesale Corp., No. 11-56757 (9th Cir. 2014). In the latter case, Costco employees complained that Costco unlawfully deducted wages from final paychecks to cover undisputed company-guaranteed credit card debt.
RETURNS FROM COMMISSION SALES
An employer may be able to deduct wages for returns when the employee made a commission on the sale. Oftentimes, there are commission agreements, and these agreements can and should outline how returns from commission sales are addressed. A commission agreement can, for example, require an employee to return the commission when the merchandise was returned. On the other hand, the commission agreement may state that commissions can be deducted directly from the paycheck when the merchandise was returned or the sale ultimately did not go through (e.g., a check bounced)
To note, according to Hudgins v. Nieman Marcus, 34 Cal.App.4th 1109 (1995), an employer cannot deduct unidentified returns from commission sales from an employee’s wages. This is again why it is so important to review pay stubs to make sure you know what your employer is deducting and why it is doing so.
An employee can create an agreement with the employer to allow the employer to recover advances against wages. Advances are prepayment of wages before they are earned. There is one thing to keep in mind, according to CSEA v. State of California, 198 Cal.App.3d 374 (1988), it is unlawful for an employer to deduct past salary advances from an employee’s wages when the employer made an error.
Many of us have been there: we break something or make an error that we think will end our careers. These types of errors can indeed be costly, but according to California law, the employer cannot take the costs out on you. That said, the employer can take disciplinary action for any negligence involved, but in the end, the employer is responsible for the costs of an employee’s mistake. The idea is this: an employee is not the insurer of the company’s losses.
However, if the employee acted out of recklessness or intentional misconduct, then the employer can hold the employee responsible. According to the Industrial Welfare Commission Wage Orders, Section 8, an employer may take action if the
breakage, shortage, or loss [that] is caused by a wilful or dishonest act or by the gross negligence of the employee.
An employer, however, cannot deduct the wages but must pursue legal action via arbitration or through the courts. The employer also must be able to prove the loss is contributed to the employee’s dishonesty, willfulness, or gross negligence.
To understand this better, here are a few examples.
EXAMPLE 1: STOLEN COMPUTER & NEGLIGENCE
An employee was at Starbucks working on a company computer. The employee got up to order another coffee. During that time, someone quickly snatched the computer and left with it. The person who stole the computer may have accessed financial or other information as well. In this scenario, not only is the cost of the computer at play but data security and the costs related to that are also at play. The employer, however, cannot hold the employee responsible for these costs.
EXAMPLE 2: STOLEN COMPUTER & RECKLESSNESS
An employee was at work goofing around. He raised his company computer to act as though he would throw it but then actually dropped it. The computer was damaged and rendered useless. In this instance, eyewitnesses may be able to account for and help the company prove that the employee had acted recklessly and not within his or her job description.
When an employer deducts wages from your paycheck and those deductions were unlawful, you have rights. You can file a complaint or lawsuit. The process, however, can be scary. Many employees fear retaliation. But the law affords you protections, too, in addition to rights. Contact Sirmabekian Law Firm at 818-473-5003to make sure you get paid what you should and, if not, take the necessary action to get compensated.
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