Keeping Up With the Kansas Wage Payment Act
| Publication year | 2014 |
| Pages | 28 |
| Citation | Vol. 83 No. 9 Pg. 28 |
By Boyd A. Byers
I. Introduction
The Kansas Wage Payment Act (KWPA or Act)[1] is an expansive and comprehensive statute that gives Kansas employees rights to secure their earned but unpaid wages.[2] The Act, among other things, requires that employers timely pay their employees all wages due[3] and limits the circumstances under which employers can withhold wages.[4]
Until last year, other than for a few legally required reasons (such as taxes and garnishments), the Act prohibited employers from withholding wages unless (1) the employee signed an authorization and (2) the deduction was for "the benefit of the employee" (which, according to Kansas Department of Labor regulations, was limited to several listed reasons such as contributions to employee retirement and health plans, union dues, and charitable contributions).[5] But in 2013 Kansas lawmakers amended the Act to allow employers, subject to certain requirements, to deduct or withhold employees' wages: as repayment for loans and payroll advances; to recover payroll overpayments; as compensation for the unpaid balance of the cost of uniforms or merchandise purchased by employees; and to recover employer property provided to employees.[6] This article will review the prior law on wage withholding,[7] explain the 2013 KWPA amendment,[8] and identify some legal and practical issues raised by the amendment that lawyers who practice in this area should be thinking about when advising their clients.[9]
II. Prior Restrictions on Wage Withholding
Before the 2013 amendment, the Act authorized employers to "withhold, deduct or divert" an employee's wages for only four listed reasons:
(1) The employer is required or empowered to do so by state or federal law.[10] (This would include things like withholdings for payroll taxes,[11] garnishment,[12] and garnishment for support.[13])
(2) The deductions are for medical, surgical, or hospital care or service, without financial benefit to the employer.[14]
(3) The employee has provided the employer with a signed authorization "for deductions for a lawful purpose accruing to the benefit of the employee."[15]
(4) For contributions for automatic enrollment in a retirement plan under Sections 401(k), 403(b), 408A, or 457 of the Internal Revenue Code.[16]
The Act also explained that those limitations should not be construed to prohibit (1) withholding for contributions to charitable organizations, when authorized in writing by the employee, or (2) deductions to unions by dues check offs.[17]
In addition to those statutory authorizations, regulations issued by the Kansas Department of Labor (KDOL) provide that an employer may make the following deductions even without the employee's written authorization:
• Deductions to correct wage overpayments caused by the employer's error—but only at the same rate as the overpayment rate.[18]
• Deductions for cash advances that were requested in writing by the employee and were made as a partial payment of future wages to be earned.[19]
• Deductions for excess cash expense allowances or advances made to the employee if the employee has not justified the amount by expense receipts.[20]
The regulations also list the type of deductions "accruing to the benefit of the employee" that can be made pursuant to a signed authorization (the Act's third type of allowed deduction):
• Contributions to employee welfare and pension plans.[21]
• Deductions for payments into company-operated thrift plans or stock option or stock purchase plans.[22]
• Deductions for payment into employee personal savings accounts.[23]
• Contributions by the employee for charitable purposes.[24] (This is duplicative of the statute.[25])
• Contributions to labor organizations for dues.[26] (The statute says this can be done by check off.[27])
• Deductions to recoup the employer's actual cost of meals and lodging provided to the employee, so long as the costs are not part of wages earned.[28]
The regulations then list certain deductions that do not "accrue to the benefit of the employee," and thus cannot be made under any circumstances, even with an employee's written consent:
• Deductions for cash and inventory shortages, breakage, returned checks or bad credit card sales, and losses resulting from burglaries, robberies, or alleged negligent acts.[29]
• Deductions for uniforms, special tools, or special equipment that are not necessary to the performance of the assigned duties and that are customarily supplied by the employer.[30]
• Any other deduction not set out by the Act or permitted by the regulations.[31]
The final "catch all" prohibition is significant, because it signals KDOL's position that any deduction not expressly authorized by the Act or regulations is prohibited. Against this background, the Act was amended.
III. Wage Withholding Allowed by the 2013 KWPA Amendment
House Bill 2022 was proposed to revise the KWPA by giving employers more discretion to withhold or deduct an employee's wages for certain purposes.[32] Representatives of the Kansas Chamber of Commerce, the Kansas Society for Human Resource Management, and the National Federation of Independent Businesses testified in favor of the bill.[33] They said it would provide employers with flexibility and guidance when there is a need to collect money from employees.[34] The Kansas AFL-CIO gave neutral testimony, pointing out that an employer's discretion to unilaterally make deductions to an employee's final paycheck could be abused.[35] There was no testimony in opposition to the bill.[36]
The 2013 KWPA amendment did not strike any provisions of the prior law. Instead, it added two new subsections to K.S.A. 44-319 to expand the circumstances under which employers may withhold or deduct wages.
Current Employees. Employers now may withhold, deduct, or divert any portion of an employee's wages, pursuant to a signed written agreement between the employer and employee, for the following purposes:
(1) To allow the employee to repay a loan or advance the employer made to the employee during the course of and within the scope of employment.[37]
(2) To recover a payroll overpayment.[38]
(3) To compensate the employer for the replacement cost or unpaid balance of the cost of its merchandise or uniforms purchased by the employee.[39]
Separated Employees. Employers may also withhold, deduct, or divest any portion of an employee's final wages, upon providing a written notice and explanation, for the following purposes:
(1) To recover the employer's property provided to the employee in the course of the employer's business, including, but not limited to, tools of the trade or profession, personal safety equipment, computers, electronic devices, mobile phones, proprietary information such as client or customer lists and intellectual property, security information, keys or access cards, or other materials until the employee returns the property to the employer. Upon return of the property, the employer must pay the wages being withheld.[40]
(2) To allow an employee to repay a loan or advance the employer made to the employee during the course of and within the scope of employment.[41]
(3) To recover a payroll overpayment.[42]
(4) To compensate the employer for the replacement cost or unpaid balance of the cost of its merchandise, uniforms, property, equipment, tools of the trade, or other materials intentionally purchased by the employee.[43]
However, any amounts withheld under the new provisions cannot reduce wages paid to below the minimum wage required under the Fair Labor Standards Act (FLSA)[44] or under the Kansas Minimum Wage and Maximum Hours Law (KM-WMHL),[45] whichever is applicable.[46]
IV. Legal and Practical Issues...
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