Withholding salary generally occurs when an employer fails to fulfill their duties to pay an employee what they agreed to pay them. Some examples of this includes:
- Refusing to issue the full amount of compensation for the hours an employee has worked;
- Making illegal payroll deductions, such as items that are considered to be for the benefit of the employee but would cause the salary to fall below the minimum wage (uniforms required by the employer but cannot be worn outside of the workplace, tools used on the job, etc); or
- Failing to pay overtime wages or minimum wage to an eligible employee.
According to state and federal laws, an employer is not allowed to withhold or fail to pay the salary or wages an employee has earned. Unfortunately, illegal withholding of salary and wage theft is a fairly common problem. Because of this, it is imperative to understand your rights as an employee under city, state, and federal wage and hour laws.
Most salary withholdings are illegal, but there are specific situations in which it is permitted to withhold a salary. These situations include:
- Voluntary Deductions and Withholdings: Your employer is allowed to make deductions that you yourself have authorized;
- Some examples of voluntary withholdings include health or disability insurance premiums, charitable contributions, union dues, meals, housing, transportation, and debts owed by the employee to the employer.
- Income Withholding Orders: If a court orders a payroll deduction, your employer must comply with those orders;
- A court most often orders a payroll deduction for unpaid taxes, child support, alimony, and other debts owed to the government such as federally subsidized student loans.
- Losses Caused By the Employee: Some states allow for wage withholding due to shortages and replacement costs for broken or damaged property; or
- However, as previously mentioned, the deduction becomes illegal if it causes the employee to fall below the minimum wage set by that state.
- Deductions Considered for the Benefit of the Employee: Things such as uniforms, tools, and lodging and meals can be withheld from an employee’s salary ONLY if it would not cause the employee’s wage to fall below minimum wage. Additionally, this withholding situation is only legal in some states, not all.
Another factor to be considered is whether or not the employee is exempt. Not all employees are able to qualify for overtime and minimum wage protections such as protection from salary withholding.
An example of this is how some states have set a different, lower minimum wage for employees who receive tips in addition to salary or hourly pay, such as restaurant servers, bartenders, valets, etc. Additionally, there are some other employees exempt from wage and hour protections, such as:
- Freelance or contract workers (photographers, writers, artists, entertainers, musicians, some construction workers, etc.);
- Administrative, executive, or professional workers; or
- Performing specific jobs such as outside sales, or IT jobs.
Employers who are covered by the Fair Labor Standards Act (FLSA) are required by the act to pay minimum wage, and therefore are not generally allowed to make decisions that would reduce an employee’s pay to below minimum wage.
And, under the 1988 Family Support Act, all child support orders, new or modified, are to include an automatic wage withholding order. This requires employers to deduct child support from an employee’s wages if the employee has alimony or child support orders.
Unfortunately, employers will sometimes intentionally miscategorize employees as exempt, in order to avoid minimum wage and overtime payments. This is obviously unethical as well as illegal. If you believe that you should be a non-exempt employee, you should contact an employment lawyer or government wage and hour agency.
Employees have rights when employers have wrongfully withheld their salary. Some things that can be filed include:
- An administrative complaint with a wage and hour agency (both state and federal government agencies enforce wage and hour laws, and employees can file complaints with either of these);
- A lawsuit against the employer withholding wages; or
- Criminal charges against the employer withholding wages.
Once the government agency has received the complaint, it will investigate the claim and take action. If violations are found, the employee might recover back wages, and liquidated damages. Depending on the situation, the agency may also negotiate a settlement on behalf of the employee; or, the government may pursue its own lawsuit against the offending employer.
If the government finds an offending employer guilty of wilfully wage withholding, it might file criminal charges. If the offending employer is convicted, they could face jail time and significant fines.
Additionally, a worker might have the right to file a civil lawsuit against their employer, demanding compensation for lost wages. You cannot file a civil lawsuit at the same as an administrative complaint.
Once the complaint is closed, the lawsuit can be filed as long as it is within the statute of limitations. In a civil lawsuit, unpaid wages and liquidated damages can be recovered. And, the offending employer might be held responsible for attorney fees and litigation costs.
It is important for you, as an employee, to understand your rights and what your employer legally can and cannot withhold from your wages. Also, salary withholding claims may involve complicated administrative processes and litigation that would require an experienced and knowledgeable attorney.
An employment attorney will help you understand your rights, determine if your salary was improperly withheld, and properly file a claim against your employer. They can also assist with any questions you may have about a deduction or wage garnishment.