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 the 2017 annual inflation adjustment to Bernalillo County's minimum wage.
Updated to reflect the 2017 annual inflation adjustment to New Jersey's minimum wage.
Updated to reflect forthcoming minimum wage requirements, which will raise the state minimum wage to $15 over the next six years.
Updated to reflect that Nevada's minimum wage will remain unchanged for 2016.
Updated to include information on the 9th Circuit ruling Oregon Rest. & Lodging Ass'n v. Perez, which upheld a regulation that employees who do not customarily and regularly receive tips may not participate in a tip pool even if their employer does not claim a tip credit.
Updated to reflect an increase in Alaska's minimum wage, effective January 1, 2016.
Updated to reflect an increase in Colorado's minimum wage, effective January 1, 2016.
Updated to reflect an increase in Connecticut's minimum wage, effective January 1, 2016.
Updated to reflect an increase in Vermont's minimum wage, effective January 1, 2016.
HR and legal considerations for employers regarding deductions above the minimum wage.