When Is an Employer Allowed to Take Money Out of Your Check?

If you’ve ever received a paycheck, you know there are plenty of deductions that come out of your overall pay: income taxes, Social Security, health insurance premiums, retirement savings and any other amounts you might’ve authorized like automatic savings or union dues.

Of course, you could also have amounts from legal garnishments taken out as well if you’ve had some issues repaying your debts or making child support payments (the leading cause of wage garnishment in the U.S., ahead of student loans, taxes, medical bills and other consumer debt). But beyond these authorized and legal withholdings, are there other times that employers are entitled to hold money from your paycheck?

First, state laws dictate what employers can and can’t do when it comes to your paycheck, so if you have any concerns, it’s a good idea to reach out to your state’s labor department, an employment attorney or even your state’s attorney general to find out what your legal rights are.

With that said, we talked to Melissa Chan, an associate attorney with Cary Kane LLP in New York, which focuses on employment and labor issues, about some of the basics of what is and isn’t appropriate when it comes to your money.

They Likely Need Your Consent

One of the first things Chan pointed out is that withholdings beyond those listed above —the basics like taxes, Social Security, etc. — likely require employee consent. So if you haven’t given your written approval, you might want to discuss the matter with your employer and then, if that doesn’t work, seek assistance with an attorney or state entity.

“We’ve seen examples where a server in a restaurant breaks something or serves the wrong dish and a customer sends it back and the employer tries to deduct those amounts from the employee’s paycheck, and that’s not legal unless there’s written consent from the employee,” Chan said (again, laws vary, state by state).

So, it’s a good idea to be careful about what you sign when you accept a new job, or even after you are already employed. It might even be wise to have an attorney review any employment agreements that ask you to consent to such withholdings.

What If You’re Late to Work?

If you are an hourly worker, your employer can dock your pay for tardiness. Of course, being reasonable in this matter is important, as Chan pointed out.

“Even from the employer’s perspective, I think erring on the side of caution would be most prudent, because there are all sorts of lawsuits out there,” Chan said. “If it’s a person who’s a minute late, it’s probably worth just paying them for the full hour.”

If it happens to you, it could be worth sitting down with your boss to discuss the matter, especially if a full hour is being docked over just a few minutes missed.

What If You Lose Company Money or Break Something Valuable?

Again, an employer can’t typically withhold money from your paycheck for these scenarios unless you’ve agreed to allow them to do so, but it’s a good idea to check your state’s specific laws.

“The employer can discipline the employee for whatever loss was incurred, but again, unless there was an agreement in place, they can’t take that money out of the employee’s paycheck,” Chan said.

That can, however, vary if the employer can prove that the employee was grossly negligent, dishonest or acted willfully, according to many state laws. The employer will, of course, need to prove that. A simple accusation won’t give them the legal right to make these deductions.

What If You Borrow Money From Your Employer?

Chances are if your employer loans you money they’re going to want a written agreement, but barring that written agreement, they can’t deduct any amounts owed from your paycheck simply because they loaned you the money, Chan said. That doesn’t mean they can’t take separate legal action against you, however, if you legitimately owe them money.

What If Your Employer Does Withhold Money Without Consent?

Your first step should be communicating with your employer, getting as much information as possible and trying to resolve the matter. If that doesn’t work, Chan said, it’s definitely wise to seek counsel. She recommended, as we already mentioned above, that it’s a good idea to reach out to an employment attorney, your state’s labor department or attorney general to get a better understanding of what your rights are.

Also, it’s good to keep in mind that keeping your debt at a manageable level can help you get more out of your paychecks. You’ll have more flexibility in both your spending, saving and investing. To see how your debt is impacting your financial health, you can check your free credit score, updated every 14 days, with the free credit report summary on Credit.com.

Image: andresr

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