The withholding of salary occurs when an employer fails to pay an employee the wages or salary they have promised to pay for the work done by the employee. For example, an employer may withhold a paycheck, that is, fail to issue a paycheck to an employee altogether. Or, an employer might fail to pay the full amount of wages that an employee has earned for the time worked. 

Another form of withholding  pay from employees is making illegal deductions from a paycheck that cause the wage paid to fall below the minimum wage. For example, an employee might deduct the cost of uniforms that the employer requires the employee to wear while on the job. If these deductions result in an hourly wage that falls below the federal minimum wage, the deductions can be illegal.

Employers might withhold pay from employees by failing to issue the overtime pay to which the employee is entitled according to federal law.

Unfortunately, the illegal withholding of salary and wage theft are common problems. Employees should understand their rights regarding the payment of wages or salaries under city, state, and federal laws.

Is It Ever Legal to Withhold Salary From an Employee?

An employer is legally required to issue the pay or salary earned by an employee within the time period stated in their employment contract. An employer cannot hold back an earned paycheck

There are, however, some specific situations in which an employer is permitted to deduct certain amounts from a paycheck. These situations include the following:

    • Voluntary Deductions and Withholdings: these are deductions and withholdings which the employee authorizes, for example, withholdings for health or disability insurance premiums, 401(k) contributions, charitable contributions, union dues, and debts owed by the employee to the employer;

 

    • Income Withholding Orders: If a court orders a payroll deduction, an employer must comply with the court order; the most common court-ordered deductions are for unpaid taxes, child support, alimony, and other debts owed to the government such as federal student loans;

 

  • Losses Attributable to the Employee: Some states allow for wage withholding due to shortages and replacement costs for broken or damaged property; 
      • However, as previously mentioned, the deduction becomes illegal if it causes the wage paid to fall below the minimum wage set by that state;

     

    • Deductions Considered for the Benefit of the Employee: Some states allow deductions for such items as uniforms, tools, and lodging and meals but only if it does not cause the employee’s wage to fall below the state’s minimum wage. 

 

    • Taxes and other legally mandated withholding: of course, an employer must make standard withholdings for federal, state and local income taxes and other payroll tax deductions required by law.

 

If an employer has correctly calculated withholdings that are authorized by law or by an employee, the employee has no grounds for a complaint.

What is the Difference Between Exempt Employees and Non-Exempt Employees?

Another factor is whether an employee is exempt or non-exempt. Some employees do not qualify for overtime and minimum wage protections. They are said to be exempt.

For example, some states have set a lower minimum wage for employees who receive tips in addition to a salary or hourly wage. Employees such as restaurant servers, bartenders, valets, drivers and the like may be paid an hourly wage that is less than the minimum wage. 

Other employees who are exempt are employees who are paid a salary rather than an hourly wage.  Also, their work must be executive or professional in nature. For example employees who perform work that is professional, administrative, executive, or involves outside sales, or is computer-related are exempt under the federal Fair Labor Standards Act.

The details differ from state to state, but if an employee falls within these categories, is paid a salary, and earns a minimum of $684 per week or $35,568 annually, they are considered exempt.

The rules are different for non-exempt employees. Employers who are covered by the Fair Labor Standards Act (FLSA) are required to pay non-exempt employees a minimum wage. Therefore they cannot take steps that would reduce an employee’s pay to an amount that is below the minimum wage.

Whether an employee is exempt or non-exempt, employers can withhold money from wages and salaries under the 1988 Family Support Act. This Act mandates that all child support orders, new or modified, must include an automatic wage withholding order. This requires employers to deduct child support from an employee’s wages when they are presented with an Income Withholding for Support order. 

What are the Consequences for Wrongfully Withholding Salary?

Unfortunately, employers will sometimes intentionally miscategorize employees as exempt, in order to avoid minimum wage and overtime requirements. This is unethical as well as illegal. If employees believe they should be non-exempt, they should contact an employment lawyer or government agency that regulates wages and hours.

Employees have options for recovering wages that employers have wrongfully withheld from their paychecks. Actions that can be taken to remedy the problem include::

    • Administrative complaint: an administrative complaint can be filed with an agency that regulates wages and hours; there are both state and federal government agencies that enforce wage and hour laws, and employees can file complaints with either of them;

 

    • Complaint in a court of law: a lawsuit can be filed in court against an employer who withholds wages or salary without justification; 

 

    • Report to a local prosecutor: in some circumstances a local prosecutor might file criminal charges against an employer who withholds wages illegally.

 

Once a government agency receives a complaint of illegal withholding, it will investigate the claim and take action if it is justified by the facts.. If violations are found, the employee might recover back wages and damages as well. Depending on the situation, the agency may also negotiate a settlement with the employer on behalf of the employee. Or, the government may pursue its own lawsuit against an employer who is withholding wages on a large scale.

If the government finds an offending employer guilty of intentionally withholding wages, it might file criminal charges. If the employer is convicted, they could face criminal punishment of jail time and fines.

In a civil lawsuit, unpaid wages and liquidated damages can be recovered. And, the offending employer might be held responsible for the employee’s attorney fees and costs.

Do I Need an Attorney for Issues Involving Withheld Salary?

If you are an employee it is important for you to understand what your employer legally can and cannot withhold from your wages. An experienced employment lawyer can explain your rights with respect  to your wages or salary.  

The law in this area is complex and may involve agencies of your local, state and federal government. It is advisable to consult with an experienced and knowledgeable employment lawyer. An employment lawyer will know all of the various laws and regulations that address the issue of wages, salaries and withholding. 

An employment lawyer will know which agency or court can best help you recover any wage or salary that has been withheld illegally. They can also answer any questions you may have about a deduction or wage garnishment. If you believe that your employer has illegally withheld money from your paycheck, you should by all means contact an employment lawyer to discuss your options.