California Labor Code section 221 prohibits employers from making any deductions from an employee’s wages. However, section 221 is a general rule and, we all know, every general rule comes with exceptions. California Labor Code section 224 provides for four exceptions which allow your employers to make certain deductions from your paycheck. They include:
• deductions authorized by federal or state law;
• deductions expressly authorized by employee in writing for insurance premiums, hospital or medical dues;
• deductions to cover health and welfare or pension plan contributions that a collective bargaining or wage agreement expressly authorizes; and
• other deductions not amounting to a rebate or deduction from the standard wage arrived at by collective bargaining or pursuant to wage agreement or statute.
As you can see some of these exceptions are extremely narrow (e.g. insurance premiums, pension plan contribution, medical dues, etc) and some of them are pretty broad (e.g. deductions authorized by laws). To better understand how the section 224 is interpreted by California courts, consider the following examples:
Deductions authorized by law:
- Taxes: Your employer is authorized by federal and California law to deduct state and federal income taxes, social security taxes, and state disability insurance taxes.
- Wage garnishments: Your employer is authorized to deduct wage garnishments if you are a judgment debtor and your employer was served with a writ of execution by the levying officer. However, your employer may not keep the deductions and is required to turn them over to the levying officer. In general, wage garnishment deductions may not exceed 25% of your total earnings, unless the judgment is a support order).
- Meals and Lodging: Your employer is authorized by to deduct specified amounts from your minimum wage if such employer provides you with meals, lodging or other “facilities” furnished to you in addition to your wages. The employer is required to keep records of all costs associated with these deductions. If your employer fails to do so, no deductions are allowed. In addition, before making meals and lodging deductions from your wages, your employer needs to obtain your “specific and prior voluntary consent.” California State Restaurant Ass’n v. Whitlow, 58 CA3d 340, (1976). California Code of Regulations section 11000 sets maximum amounts for meals and lodging credits and sections 11010-11150 of the Code set forth specific standards regulating the quality of meals and lodging.
- Employee’s Debts: If you owe money to your employer and you quit or get fired, your employer may not deduct from your final paycheck the unpaid balance. Phillips v. Gemini Moving Specialists, 63 CA4th 563, 572, (1998). Under certain rare circumstances, an employer is allowed to make periodic deductions from your paycheck, but only if you acknowledge the debt in writing and consent to deductions.
- Cash Shortage and Loss of Tools: If your work requires you to use a cash register, your employer may not reduce your wages to cover a cash shortage. Your employer also cannot request that you reimburse the shortage by forfeiting your tips or commissions. The same rule applies if you break or lose any of your employer’s tools or uniform. The only time your employer is allowed to demand that you pay for the cash shortage, loss or breakage of equipment is if you act willfully, dishonestly, or with the gross negligence.” 8 Cal.C.Regs. § 11010 et seq. In other words, if your cash register is short because you made a mistake, you are not responsible for the loss. In addition, mere allegations that you steal money are not sufficient for your employer to force you to pay for the shortage. Your boss needs to present clear evidence showing that you are dishonest or grossly negligent. Under California Labor Law, cash shortage, loss or breakage of equipment are considered to be business expenses that cannot be passed onto the employee. Prachasaisoradej v. Ralphs Grocery Co., Inc., 42 C4th at 238, See also DLSE Opinion Letters 1993.02.22–2 & 1994.01.27.
- Uniform: If your employer requires you to wear a uniform at work, the employer must provide you with the uniform and pay for its maintenance. But if your employer only requires you to wear basic clothing of unspecified design that is “usual and generally useable in the occupation,” then your employer does not have to pay for your clothing.
- Business Expenses: California Labor Code section 2802 requires your employer to reimburse you for all expenses or losses that you incurred “in the direct consequence of the discharge of your work duties.” The statute prohibits employers from passing the expenses related to their business onto the employee. For example, if you use your personal vehicle for work, your employer, as a matter of law, must reimburse you for the cost of gas and mileage. Analogously, you are entitled to reimbursement for any travel expenses that you incurred while performing services for your employer, including meals, lodging, the cost of tolls, parking, rental vehicle, laundry, and etc.
Keep in mind that even if you are paid in commissions, you are still entitled to these reimbursements and your employer may not deduct business expenses from your commissions.
- Workers’ Compensation Costs: California Labor Code section 3751 prohibits employers from taking “any deductions from the earnings of any employee, either directly or indirectly, to cover the whole or any part of the cost of (workers ‘) compensation … ”
- Deductions Against Commissions: Under California Labor law, commission is considered to be a wage, and as such no deductions can be made against commissions. However, in some cases, your employer may be allowed to make certain deductions. Consider the following examples.
If you receive both wages and sales commissions, your employer is allowed to make a chargeback against your commissions if those commissions were paid in advance and the sale later falls through. (e.g. merchandise returns). However, such deductions are possible only if you agree to them in writing. The “chargeback” deduction is lawful because “an advance commission by definition does not become a wage unless all conditions for performance have been satisfied.” Steinhebel v. Los Angeles Times Communications, 126 CA4th 696 (2005)
However, your employer may not charge back commissions on returned merchandise sold by other employees or when the selling employee cannot be identified. The rational is simple – if your employer fails to keep track of who sells what, you should not be responsible for unidentified merchandise returns. Hudgins v. Nieman Marcus Group, Inc. (1995) 34 CA4th 1109.
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As you can see California labor law is somewhat comprehensive when it comes to regulating wage deductions. However, a legal status of certain deductions remains to be unresolved and has been the subject of fierce litigation. If you feel like your employer makes unlawful deductions against your wages, it is important that you seek professional legal assistance. If you have questions regarding this article or other emplayment law related questions, feel free to contact our San Francisco employment law attorney.
I was paid Holiday pay for Thanksgiving and the day after. Subsequently the company decided that there was a technicality in our union contract which allowed the co to not pay me. They took the 16 hours out of my following check in one lump sum. Is the company allowed to legally make that deduction without my authorization?
Im a commission only employee, most of our sales are paid by check based on monthly statements of account sent to clients. If a cuatomer pays by credit card, our employer deducts the C.C. processing fee from our commission earned on the sale. Is this legal?
Additionally, we are only compensated for the first $500 of our fuel expense monthly, and are on are own for any additional work related fuel expense. Is this “truck” expense proper compentsation when fuel alone costs on average of $800 a month?
Ken did you ever get an answer on the Credit Card fees being deducted from your commissions??
Hello I work for a boost mobile , my register was OK when I closed my numbers matched . I counted my money right also I was supposed to deposit $202 I know I did put that amount. Today when I came in my job my manager says come here what is this ur missing $5o . Which I find weird bcuz I know everything was OK . He also told me he was going to deduct from my check which I find so unfair because I swear I didn’t take anything so upset … Can someone advise me on what to do please ASAP thanks.
I work for a company in sales. they let me drive their company car. However they charge me for the car is that legal?
I worked 3 days this pay period working 18 hrs that came out to $208.00 after tax deduction i was left with $191.47 then a deduction for personal withholding of $191.47 leaving my check to be $0 balance is that legal to take all my money i thought it was only a percentage they could take.
I just got Laid off from a major Bank (2017, after > 25 years of service). I received my severance (lump sum) without issue, but now I received a letter stating that due to “Late submission/Processing of Separation Information” (I have no idea what that means), they duplicated a paycheck, basically a double pay for unused Vacation, PTO (purchased Time off) and a couple days regular salary, this “duplicate payment” was received on a following pay period from the original pay-out. Also, I have basically retired and don’t plan on rejoining the work force.
It was a direct deposit into my checking account. And based on what I signed, I didn’t see any verbiage related to over payment. This “over payment” was a separate/stand alone deposit and NOT linked in any way to the severance package. It was a payroll deposit, that included regular salary as well as reimbursement for unused vacation pay.
I am kinda thinking Sec. 221 of the Ca. labor code has controlling authority here:
It shall be unlawful for any employer to collect or receive from an employee any part of wages theretofore paid by said employer to said employee.
(Added by Stats. 1937, Ch. 357.)
Does this former employer have any recourse to recoup this over payment?