Question: If an employee uses his company phone for long distance calls or goes above the data limit, is there a way for the company to recover the money? From what we understand, we are not able to deduct the amount from paychecks, but can the company require a reimbursement from the employee? If they do not pay the overage charge, can they be terminated as long as we have a phone policy in place with those stipulations? We do business in Illinois, New Jersey, New York, Pennsylvania, and Wisconsin.
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Here is your answer from the experts at HR.BLR.com:
Employers are often faced with the situation where an employee owes the company money but a deduction from wages would violate state or federal law. Generally, federal law prohibits a deduction from pay in this situation if it would bring the employee’s pay below the minimum wage. That, however, is not the end of the analysis.
Issues related to deductions from pay and an employer’s ability to recoup money from an employee are governed by state laws as the state laws generally provide greater protection to employees. As you note, state laws generally limit deductions from an employee’s pay check. Here’s the information on each of the states you mention:
Illinois. Employers may make deductions from employees’ pay only if the deductions are (IL Comp. Stat. Ch. 820 Sec. 115/9):
- Required by law (such as state and federal taxes and Social Security contributions);
- For the benefit of the employee;
- In response to a valid wage assignment agreement or wage deduction order; and
- Made with the express written consent of the employee.
New Jersey. New Jersey employers may withhold a portion of an employee’s wages when expressly permitted to do so by federal or New Jersey state law or regulation, e.g., federal and state income tax withholding. In addition, if required by a collective bargaining agreement or authorized in writing by the employee, employers may make deductions for the following (NJ Rev. Stat. Sec. 34:11-33.6; NJ Rev. Stat. Sec. 34:11-4.4; NJ Admin. Code Sec. 12:55-2.1):
- Employee benefit, health, pension, retirement, or profit-sharing plans
- Payments into company-operated thrift plans pursuant to the employee’s written authorization
- Payments into stock option or stock purchase plans to buy stock of the employing corporation at market price or less if authorized in writing by the employee or under a collective bargaining agreement
- Payments to banks for Christmas, vacation, or other savings funds
- Payments into employee personal savings accounts, such as payments to a credit union, savings fund society, savings and loan or building and loan association if authorized by employees
- Payments related to an employee’s financial obligation to the state of New Jersey with the employee’s written authorization (NJ Admin. Code Sec. 12:55-2.3)
- Charitable contributions to organized and generally recognized charities, provided the deductions for such contributions are approved by the employer
- Union dues and fees, or to payments made to purchase U.S. government bonds
- Mass transit tickets, provided that such method of payment is available to all employees
- Similar purposes authorized by labor commissioner (NJ Admin. Code Sec. 12:55-1.2 and Sec. 12:55-2.2)
New York. The following deductions are prohibited:
- Repayments of loans, advances, and overpayments, that are not in accordance with the law;
- Employee purchases of tools, equipment, and attire required for work;
- Recoupment of unauthorized expenses;
- Repayment of employer losses, including for spoilage and breakage, cash shortages, and fines or penalties incurred by the employer through the conduct of the employee;
- Fines or penalties for tardiness, excessive leave, misconduct, quitting without notice;
- Contributions to political action committees, campaigns, and similar payments; and
- Fees, interest, or the employer’s administrative costs.
Pennsylvania. Under Pennsylvania law, an employer may deduct from an employee’s wages only charges required by law, permitted by law, or authorized by the employee in accordance with state law (PA Admin. Code Ch. 34, Sec. 9.1).
The following deductions may be made if authorized in writing by the employee or a collective bargaining agreement for the following items (PA Admin. Code Ch. 34, Sec. 9.1):
- Payments into company-owned thrift plans or stock option or purchase plan
- Payment into personal savings accounts; Christmas, vacation, or other savings funds; purchase price of U.S. government savings bonds
- Charitable contributions
- Contributions for local area development activities
- Labor organization dues, assessments, initiation fees, and other labor organization charges authorized by law
- Repayment to the employer of bona fide loans as long as deductions were authorized in writing at the time the loan was made
- Payment for the purchase or replacement from the employer of goods, services, facilities, rents, or similar items
- Payment for the purchase from third parties of goods, services, facilities, rents, or similar items
- Payment authorized in writing by employees that, in the discretion of the Department of Labor and Industry, are proper and conform with the intent and purpose of the Wage Payment and Collection Law
Wisconsin. Employers in Wisconsin may make deductions from an employee’s wages for: (WI Gen. Stat. Sec. 241.09)
- Federal, state, and local taxes as required by law
- Items authorized by the employee in writing such as union or employee club dues, for purchasing insurance or bonds, payments to credit unions, charitable contributions, or for repaying a debt to the employer
Employers may not make deductions for defective or faulty workmanship, lost or stolen property, or damage to property unless the deduction is authorized in advance and in writing by the employee or if the damage or loss is due to the employee’s negligence, carelessness, or willful and intentional misconduct. Any agreement between the employer and employee to the contrary is void and without legal effect.
Written Policy. As you note, deducting the cost of overtime calls or overages for a company-issued cell phone from an employee’s pay would not be permitted in these states.
It makes sense to put some limits on employee use of phones issued by the company. The best way to accomplish this is through a written policy that spells out permitted uses for the phone, and a procedure for an employee to reimburse the company for any personal calls or overages each month. Some employers ask employees to review the bill monthly, highlight any personal calls, and then write a check to the company. The policy could be written to prohibit personal use and overages, so that if an employee violates the policy on a repeated basis after being warned, disciplinary action can be taken.
It is important to have a written policy that is acknowledged and signed by an employee. In addition, at the time an employee is issued a phone, you may want to have a written agreement with the employee acknowledging his or her responsibility for personal calls and overages. It is a good idea to work with local employment counsel to craft a policy and written agreement that will support both a request for reimbursement and possible disciplinary action for repeated policy violations. Keep in mind that the policy would not be retroactive, and would only apply to overages that occur after the policy is distributed and acknowledged by employees.