Can I deduct an employee’s remaining debt from a final paycheck?
The HR Management & Compliance Report: How To Comply with California Wage & Hour Law, explains everything you need to know to stay in compliance with the state’s complex and ever-changing rules, laws, and regulations in this area. Coverage on bonuses, meal and rest breaks, overtime, alternative workweeks, final paychecks, and more.
California courts and the labor commissioner have ruled that an employer may not deduct the full unpaid balance of a debt to the employer from an employee’s final paycheck. This means that while employers may deduct installment payments from an employee’s paychecks for such a debt with the employee’s prior written consent, employers may set off final wages only for the normal installment, not for the balance of the indebtedness.
Further, employers may not fire a worker in retaliation for complaining about an employer’s unauthorized setoff of debts from the worker’s pay.
The California Labor Code, court decisions, and public policy prohibit deductions from pay without the employee’s consent when they’re for a reason other than a requirement of law or a collective bargaining agreement. Deductions may not reduce wages below the standard wage agreed on through collective bargaining and should be authorized by the employee in writing. — CELA Editors