Employee loses her company laptop, can you force her to replace it?
April, 2006
The rules of deducting expenses from exempt and non-exempt employees.
According to the Department of Labor's recent Opinion Letter FLSA2006-6, deductions from salary for loss or damage of company equipment could violate the Fair Labor Standards Act. Figuring out whether an employee must reimburse the employer depends on whether she is an exempt or non-exempt employee.
Non-exempt Employees
An employer may not lawfully require an employee to cover the expense of the business if it reduces the employee's pay below any statutory requirement for minimum wage or overtime premium. Employers must pay minimum wages and overtime premiums unconditionally. Violations can occur directly, when the employer deducts the cost of the equipment from an employee's pay, or indirectly, when the employee must incur an out-of-pocket expense without a reimbursement from the employer.
An employer will have still have more hurdles beyond assuring minimum wages and overtime premiums. Aside from already recognized deductions codified in statutes like medical care, taxes, etc., Oregon and Washington require that employers have a signed authorization for the deduction from the employee and that the deduction be for the employee's benefit, so reimbursing the employer for damaged equipment will not qualify. California also distinguishes that public employees must authorize the deduction on the correct form approved by the State Controller. Still, before deducting from an employee's paycheck contact your Bullivant employment lawyer for specific rules that may apply.
Exempt Employees
Exempt employees are exempt so that rules regarding overtime pay do not apply. These are employees who work in a bona fide executive, administrative or professional capacity and receive the requisite compensation on a salary basis. A key component to being exempt is that the employee receives the same compensation without reduction regardless of variations of quality or quantity of work output. The Wage and Hour Division of the Department of Labor strictly interprets deductions to be limited to these seven instances:
- Full personal days
- Full sick days
- Deductions up to the amount received from jury duty, attendance as a witness at a court proceeding, or military pay
- Penalties for infractions of safety rules of major significance
- Disciplinary suspensions
- First/Last weeks of employment
- Voluntary unpaid leave under the Family and Medical Leave Act
Deducting for loss, damage or destruction of employer property would defeat the exemption because the salaries would no longer be guaranteed, or free and clear as required by the regulations. Such subtraction would violate the prohibition against reductions in compensation for quality of employee work. Whether deducting from a paycheck, or out-of-pocket reimbursement, either approach violates the salary basis rule. This rule applies even with a prior written signed agreement.
For more information please contact your Bullivant employment lawyer.