Generally speaking, employers are prohibited from making wage or payroll deductions that are considered to be illegal under state or federal law. Some of the most common examples of illegal payroll deductions generally include:

  • Employment taxes that, by law, must be paid by the employer and not the employee. In most cases, employers must pay the federal unemployment tax (“FUTA”) as well as state unemployment taxes;
  • Workers’ compensation premiums, as employers cannot legally shift the cost of workers compensation premiums on to employees. Employers are responsible for these premiums in their entirety;
  • Deductions that would reduce an employee’s earnings below the minimum wage, as detailed in the federal Fair Labor Standards Act (“FLSA”); and
  • Deductions for nearly all types of personal protective equipment that employees are required to wear under the federal Occupational Safety and Health Act (OSHA”) 

What deductions are permitted at the state level will vary on a state by state basis. Some common examples of subjects that vary at the state level include:

  • Deductions for the cost of a uniform that an employee is required to wear while on the job;
  • Deductions for cash register shortages. Many states allow paycheck deductions for cash register shortages when the employee is clearly at fault for the shortage. Some states, such as California, do not permit such deductions unless the employee was grossly negligent. In New York, an employer cannot deduct an employee’s paycheck for cash register shortages at all; and
  • Employment-related expenses, such as employee training or seminars. 

Unlawful deduction of wages is considered to be a form of wage theft. Wage theft refers to the unlawful practice of employers not paying their employees the full amount for the work they have performed.

Are There Different Types of Payroll Deductions?

It is important to note that there are a number of deductions that are voluntary. What this means is that an employee can choose whether to authorize deductions for a variety of items. Examples of such items include health insurance premiums, and deductions for an employee retirement plan. Employees may also authorize deductions for union dues or charitable contributions. Some employers allow loans or advances to employees, and employees may authorize deductions for these items as well. 

Generally speaking, employees who authorize voluntary deductions must consent to these deductions. This consent is provided in a written document, outlining the amount to be deducted per pay period. It is uncommon for an employer to be permitted to make a deduction in the absence of an employee’s written consent to a deduction.

As previously mentioned, depending on your location as well as the nature of the deduction, your employer’s actions could have been entirely legal. The most common example of this would be how some employers charge their employees for the cost of necessary supplies through payroll deductions. These supplies most often include uniforms and tools needed to perform the job. While this conduct is questionable, it is not necessarily illegal.

Federal labor law allows employers to deduct the cost of supplying uniforms and tools from their employees’ paychecks. Under federal law, employers may also deduct the cost of cleaning and maintaining those supplies. Other types of payroll deductions without consent may be mandatory for government tax, social security, or Medicare purposes.

In terms of federal labor laws, the only limitation involves minimum wage. As previously discussed, the amount of money being deducted cannot drop the employees’ wages below the federal minimum wage. As such, if an employee earns only the minimum wage, they do not have to pay for supplies at all and a deduction for such would be considered illegal.

Again, many states provide more protections for employees than at the federal level. An example of this would be how New Jersey prohibits employers from charging employees for uniforms that display a company logo, while California and Massachusetts do not allow charging employees for the cost of tools. 

What Should I Do if I Experience an Illegal Payroll Deduction? What Types of Remedies Are Available?

You should begin by simply informing your employer of the problem. The payroll deduction could have been accidental, such as in the case of an administrative error, or your employer may not have been aware that their action was illegal. Speaking with your employer’s human resources department for payroll issues is often required before you may make any formal complaint or take legal action.

The United States Department of Labor is responsible for enforcing federal labor and employment laws. If you have been subjected to deductions that are illegal under federal law, and speaking with your employer has not produced any results, you may want to file a complaint with the Wage and Hour Division of the United States Department of Labor. The Department of Labor maintains a list of Wage and Hour Division local offices.

If the illegal paycheck deduction violated state laws, you should contact your state’s Department of Labor. State Departments of Labor generally have local offices, and a county may have its own local office. In instances involving illegal deductions that have been made both under state and federal law, the United States Department of Labor and the state Department of Labor should be contacted.

Federal law, as well as most state laws, prohibit an employer from retaliating against an employee in response to the employee’s filing an illegal wage or payroll deduction complaint. Examples of retaliation include firing, demoting, and suspending. It is imperative to remember that you may file a complaint alleging retaliation if you believe you have been penalized for filing an illegal wage deduction claim.

As briefly mentioned, illegal paycheck deductions are considered to be a type of wage theft. As such, remedies for a paycheck violation would be similar to the remedies prescribed for wage theft violations. Under federal law, you are allowed to file a legal claim against your employer for monetary damages. If your case is successful, you could receive all of the unpaid wages owed to you under the law. This is commonly referred to as back pay

You could also have the company pay your legal fees that you incurred as a result of their violation. Finally, if you can prove that you suffered additional economic losses as a result of the employer’s actions, a jury may also award monetary damages for these losses. An example of this would be missed business opportunities. 

Taking Legal Action

If you are facing any sort of employment issues, such as an employer making an illegal paycheck deduction, you should consult with a local employment lawyer. An experienced and local employment attorney will be most knowledgeable in terms of your state’s laws regarding paycheck deductions and wage theft, and how those laws will affect your case.

In terms of the help that an attorney can provide, an attorney can help you determine what your next steps should be. An attorney will advise you regarding what documentation you should collect as evidence, and can help you file a complaint with the necessary agencies. Further, should you need to take private legal action against your employer for an illegal paycheck deduction, your attorney can initiate a civil lawsuit on your behalf, and represent you in court as needed.