Employers are generally prohibited from making wage or payroll deductions that are illegal under state or federal law. An employee whose wages have been illegally deducted under state or federal law may file a complaint with the employee’s state Department of Labor, or the United States Department of Labor. If the complaint is resolved in the employee’s favor, the employee may recover the funds that were illegally deducted.

What Can an Employer Deduct from Your Wages?

The law requires that certain deductions be made from an employee’s wages. Required deductions include those for income tax withholding, and Social Security and Medicare taxes (as well as any other state specific taxes). 

Other required deductions include deductions for court-ordered obligations such as alimony and child support. In addition, an employer must garnish an employee’s wages, if required to do so under a judge’s order. The garnished money is then used to pay the employee’s creditors.

Can an Employee Authorize Wage Deductions?

A number of deductions are voluntary. This means that the employee can choose whether to authorize them. Employees may choose to authorize deductions for a variety of items. These 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. Employees may authorize deductions for these items as well. 

Employees who authorize voluntary deductions must generally consent to these deductions in a written document that outlines the amount to be deducted per pay period. The employer is generally not permitted to make a deduction in the absence of an employee’s written consent to a deduction.

What are Examples of Illegal Wage Deductions?

Illegal wage deductions generally include:

  • Employment taxes that, by law, the employer must pay. Employers generally must pay the federal unemployment tax, known as FUTA, as well as state unemployment taxes.
  • Workers’ compensation premiums. Employers cannot shift the cost of workers compensation premiums on to employees; rather, employers are responsible for the premiums in their entirety.
  • Deductions that bring an employee’s earnings below the minimum wage as provided for in the federal Fair Labor Standards Act (FLSA).
  • Deductions for virtually all types of personal protective equipment (PPE) employees are required to wear under the federal Occupational Safety and Health Act (“OSH Act’). The OSH Act is a federal law administered by the federal Occupational Safety and Health Administration, or OSHA

Some states permit certain deductions, while other states prohibit the same deductions.  Examples where state law varies include:

  • Deductions for the cost of a uniform that an employee is required to wear.
  • Deductions for cash register shortages. Many states permit deductions for cash register shortages attributable to the employee. 
    • In contrast, California does not permit such deductions unless the employee was grossly negligent. 
    • In New York, an employer cannot deduct for cash register shortages at all, even if can be proven that the employee was the only person with access to the cash drawer.
  • Employment-related expenses, including employee training or seminars. 

What Can I Do if My Employer Has Made an Illegal Payroll Deduction?

The United States Department of Labor is responsible for enforcing federal labor and employment laws. Individuals who have been subjected to deductions that are illegal under federal law, may 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.

Individuals who have been subjected to deductions under state law may contact their state’s Department of Labor. State Departments of Labor typically have local offices. A county may have its own local office. A major metropolitan area may have its own local office.

In instances where illegal deductions have been made both under state and federal law, the United States Department of Labor and the state Department of Labor should be contacted.

Can I Face Retaliation if I File an Illegal Wage Deduction Complaint?

Generally, federal law, as well as most state laws, prohibit an employer from retaliating against (i.e., firing, demoting, suspending) an employee in response to the employee’s filing an illegal wage or payroll deduction complaint. An individual may file a complaint alleging retaliation if they believe they have been penalized for filing an illegal wage deduction claim.

Do I Need a Lawyer to File a Complaint for an Illegal Wage Deduction?

Filing an illegal wage deduction complaint can be a complicated process. You may wish to contact an employment law attorney for assistance. An employment law attorney can review the facts of your claim. The attorney can assess whether federal or state laws have been violated. The attorney can file complaints with the appropriate government entities on your behalf. If needed, the attorney can also represent you at legal proceedings. These proceedings include hearings, arbitrations, mediations, or trials.