All employees who receive a paycheck know that there are a range of deductions that are taken out of their paycheck, from federal and state taxes and social security contributions, to deductions that are requested by the employee, such as insurance premiums, pension contributions, and IRA plans.
Another type of paycheck deduction can occur if an employee makes a mistake that costs the employer or the company money. Circumstances that determine if the employer can deduct money from the paycheck of employees are:
- Where the workplace is located. These rules vary from state to state and some states follow only the federal rule, which is that employees can have their pay deducted for mistakes that cost the company money, but not to the point that their wages are reduced to below minimum wage levels.
- If the employee is considered exempt or non-exempt.
Depending on the circumstances, the employer may dock the employee’s pay or put them on unpaid suspension for the violation.
In New Jersey, pay docking is not permitted under any circumstances. If you work in New Jersey and your employer docked your pay, do not hesitate to contact an experienced employment lawyer.
What Are the Federal Laws Against Pay Docking?
An employer may not dock your pay or impose any fines for things like deficient performance, mistakes, damage, or shortages. According to the federal Fair Labor Standards Act (FLSA), in some states, an employer may dock your pay for a mistake if your employer believes that you were responsible for the mistake and you agree in writing to pay for the damage it caused. However, the deductions cannot reduce your pay to fall below the current minimum wage.
In most cases, employers may not dock the pay of salaried employees who are exempt from the FLSA’s overtime rules. The exception to this rule is if an exempt employee committed a serious safety violation, or violated workplace conduct rules. For example, if an employee sexually harassed a co-worker, that employee may be placed on unpaid leave, provided the company has a written policy, which would apply to all employees.
What Are State Laws on Pay Docking for Employee Mistakes?
New Jersey, as well as several other states like New York and Delaware, prohibit pay docking, regardless of whether the employee is exempt or non-exempt. Other states have laws that allow employers to dock workers’ paychecks for mistakes made at work, but only under certain circumstances, and the employee’s written consent may be required. In states where pay docking is allowed, it is often limited to certain types of mistakes, including the following:
- Cash or cash register shortages.
- Accepting a bad check.
- Lost, damaged, or broken equipment.
If you work in a state that does not enforce specific laws on pay docking, the federal FLSA overtime rules are your only protection. That means that your employer may dock you pay, provided it stays at or above minimum wage.
What Are the Penalties of Pay Docking?
If your employer engages in illegal pay docking, they will be subject to penalties, including the loss of exemption status for the period that the pay docking occurred. Loss of exemption status means that the employer will have to pay you overtime wages for the number of hours that you worked that exceeded 40 hours in one week, which is not an option for exempt employees under most circumstances.
If the pay docking was an accidental, one-time incident, the employer will still need to reimburse you for your time but will not lose exemption status. When determining whether your employer engaged in the actual practice of improper pay docking, the courts will consider the following factors:
- The number of improper pay deductions.
- The time period when the deductions were made.
- The number and location of employees subject to the improper pay, deductions, and the number of managers responsible for making them.
- Whether the employer clearly explained the company’s policy regarding permissible and impermissible paycheck deductions.
The employer may avoid losing overtime exemption if they:
- Explained the policies of permissible and impermissible deductions and the complaint procedure to the employee.
- Reimbursed the employee for the improper deductions taken.
- Commits to comply with company payroll policies in the future.
What Is the Difference Between Exempt and Nonexempt Employees?
If you are classified as an exempt employee, it means that you are exempt from the overtime provision of the FLSA. In most cases, exempt employees are paid a salary that is above a certain level and work in an administrative, executive, professional, computer, or outside sales role. Exempt work is often referred to as “white-collar jobs.”
While an exempt employee is not eligible for overtime pay, an employer may choose to compensate the employee for extra hours worked in other ways, including a range of benefits packages. The benefit of being an exempt employee is that they earn the same amount of money each pay period, so they do not need to be concerned about how a drop in hours worked will impact their paycheck. In addition, exempt employees tend to have a more flexible work environment than non-exempts employees because they are paid for the job they do, rather than the amount of time it takes to complete the job. As a result, employers may not be concerned if the employee takes a long lunch break or needs to leave early for an appointment.
The main downside of being an exempt employee is that they are not eligible for overtime pay if they worked a considerable number of hours to complete a project. According to the Department of Labor (DOL), an employee is considered exempt if they earn a weekly rate of at least $684 or an annual salary of $35,568.
Non-exempt employees are typically paid an hourly wage, as opposed to an annual salary. If they are paid a salary, it is less than the minimum amount determined by the Department of Labor. If you are a non-exempt employee, you are entitled to overtime pay if you work more than 40 hours in a week. According to the FLSA, if you work more than 40 hours, your employer must pay you time and a half for each hour. The main benefit of being an exempt employee is that you know that you are going to be compensated for every hour that you work and that you are entitled to overtime pay. The downside is that if the employer cuts hours, you will make less money.
What Should I Do If My Employer Docked My Pay?
If you have been subjected to a payroll deduction that is prohibited by federal law, you may file a complaint with the Wage and Hour Division of the United States Department of Labor. If you are a New Jersey resident, you can contact the state Department of Labor and Workforce Development.
New Jersey employers are prohibited from docking pay under any circumstances, so you may be eligible for financial compensation by filing a complaint against your employer.
Of course, employees are often fearful to reach out to the government about these issues, fearing they will be fired or demoted by their employer. However, according to federal and state laws, employers are legally prohibited from retaliating against you for filing a wage deduction complaint. For example, your employer may not terminate, demote, or suspend you from your job in response to your complaint. In fact, if your employer does retaliate against you, you may file a second complaint for retaliation.
What Defense Strategies Might My Employer Pursue?
If you reported an illegal dock in pay, your employer may argue that you consented to, or authorized the deduction, or that the paycheck deduction is authorized in your state. The following are examples or paycheck deductions that you may choose to authorize:
- 401K contributions.
- Health insurance premiums.
- Union dues.
- Charitable contributions.
While New Jersey law is strict and does not allow employers to deduct from employee’s pay for any reason, these rules vary state to state. Depending on the state in which you work, the following are examples of other deductions that may or may not be permitted:
- Cost of a uniform that employees are required to wear.
- Cash register shortages that are the employee’s fault.
- Costs associated with training and seminars that are required by the employer.
Can My Employer Dock My Pay for Covid-Related Time Off?
If you take time off from work because you or a close family member is suffering from a serious health condition, including COVID 19-related health complications, you are protected by FMLA. However, if you take time off to avoid being exposed to other workers, this does not qualify as protective leave, according to the FMLA. In addition, if you are temporarily relieved from your position due to the pandemic, your employer is not required to pay you for that workweek.
Cherry Hill Employment Lawyers at Sidney L. Gold & Associates, P.C. Assist Workers With Pay Docking Issues
If your employer has docked your pay, you are urged to contact one of our Cherry Hill employment lawyers at Sidney L. Gold & Associates, P.C. as soon as possible. Call us at 215-569-1999 or fill out our online form to schedule a free consultation. Located in Philadelphia and Pennsauken, New Jersey, we serve clients throughout South Jersey, including Cherry Hill, Haddonfield, Marlton, Moorestown, and Mount Laurel.