Overview: As a general rule, employers may make any deductions from an employee’s wages that the employee agrees to, as long as the deductions do not bring the employee’s pay below rate required by minimum wage laws.
For example, consider a private security company that requires its guards to wear a uniform to work. The company provides the uniforms at a cost of $300. Guards that cannot pay for the uniforms out of pocket can have the cost of the uniform deducted from their first paycheck. A guard is paid $10 an hour and works 40 hours per week, for a gross pay of $400 per week. If the company deducted the cost of the uniform from the guard’s biweekly paycheck, it would reduce the guard’s pay to $250 per week. The guard’s hourly wage would thus be $6.25 per hour ($250 divided by 40 hours), well under the federal minimum wage of $7.25 per hour. The employer would have to either make up the difference of $80 or prorate the deduction over two biweekly paychecks.
Author: Michael Cardman, Legal Editor
Updated to reflect a forthcoming amendment to the tip pools law.
Updated to include a forthcoming amendment regarding the subminimum wage for employees of seasonal amusement and recreational establishments.
Updated to include developments regarding employee retention of tips.
Updated to reflect the forthcoming Minneapolis minimum wage ordinance.
Updated to reflect the Flagstaff minimum wage ordinance, effective July 1, 2017.
Updated to reflect information on a court ruling that the tip credit does not apply to restaurant delivery drivers.
Updated to reflect an announcement regarding the state minimum wage rate.
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HR and legal considerations for employers regarding deductions above the minimum wage.