Disney to Pay Millions After Deducting Employees' Wages for Costumes

Author: Michael Cardman, XpertHR Legal Editor

March 21, 2017

The Walt Disney Company has agreed to pay $3.8 million in back wages to more than 16,000 employees after the US Department of Labor (DOL) found it had violated the minimum wage, overtime and recordkeeping provisions of the Fair Labor Standards Act (FLSA).

Disney deducted the pay of many employees at its resorts in Florida for the cost of required costumes, which caused their hourly rates to fall below the federal minimum wage of $7.25 per hour, according to a press release from the DOL.

Under certain circumstances, employers may count the reasonable cost of things like lodging and meals as wages. For example, an employer would not violate the FLSA's minimum wage requirement if it paid an employee who works 40 hours per week a direct cash wage of $6.00 per hour plus board and lodging with a reasonable cost of $100 per week ($240 direct cash wages plus $100 board and lodging divided by 40 hours equals a regular rate of $8.50 per hour).

However, employers may not count as wages the costs of uniforms and other items that are considered to be primarily for the benefit or convenience of the employer. So, if an employer requires its employees to bear the cost of required uniforms, it may not reduce the employees' wages below the federal minimum wage of $7.25 per hour and/or below any required overtime pay.

For example, if an employee were paid $7.75 per hour (50 cents more than the current minimum wage of $7.25) and worked 40 hours in a workweek, the employer could legally deduct as much as $20 ($0.50 multiplied by 40 hours) in uniform expenses from the employee's wages that workweek.

An employer also may prorate deductions for the cost of a uniform over a period of paydays, as long as the prorated deductions do not reduce the employee's wages below the required minimum wage or overtime compensation in any workweek. For example, if a uniform cost $100, the aforementioned employer could deduct $20 per workweek for five workweeks.

In addition to making unlawful uniform deductions, Disney failed to compensate employees performing duties before and after the designated starts and ends of their shifts, and failed to maintain required time and payroll records, according to the DOL.

A request for comment from Disney had not been returned as of the time this article was published.