Is an employer prohibited from making a deduction from an employee's next wage payment as reimbursement for a prior wage overpayment?

Author: Alice Gilman

It depends. It is the Department of Labor's long-standing position that if an employer makes a loan or an advance of wages to an employee, the employer may deduct the amount loaned or advanced from the employee's earnings, even if the deduction reduces the minimum wage or overtime pay due the employee under the Fair Labor Standards Act. Although such deductions may be made without the employee's permission, it is preferable for an employer to obtain this permission.

However, the applicable state law may prohibit such deductions. In addition, an employer may not deduct administrative costs or charge interest if that would result in the employee's earnings falling below the minimum wage for that week.