South Carolina Lawyer
SC Lawyer, July 2006, #3.
Employee Paychecks: Proper Wage Withholdings Can Prevent Employers from Picking Up the Tab
South Carolina LawyerJuly 2006Employee Paychecks: Proper Wage Withholdings Can Prevent Employers from Picking Up the TabBy Douglas L. LineberryEmployers are often confronted with situations where they desire, or are required, to withhold wages from an employee's paycheck. These situations vary and can include an employee repaying employer loans, paying for uniforms, lodging or damaged equipment or making child support payments pursuant to a court order. Even though withholdings occur on an ever-increasing basis, especially given the frequent use of electronic deposits and withdrawals, withholding wages from an employee's paycheck remains one of the least understood areas of the myriad statutes and regulations impacting employers. Counsel should warn employers against adopting a carefree attitude in this area. Failure to abide by pertinent statutory and regulatory requirements could have adverse consequences on several levels.
In general, when excluding withholdings for employee benefit purposes or as otherwise required by law (such as federal, state and local taxes), two situations exist in which funds are removed from an employee's paycheck: deductions and garnishments. Deductions can range from repayment of employer loans to docking pay for absences. Garnishments, on the other hand, occur when employers withhold a portion of an employee's paycheck in compliance with a court order requiring payment to a third party.
Deductions Federal restrictions
With respect to deductions, employers must remain cognizant of both federal and state laws protecting employees. On the federal level, the Fair Labor Standards Act (FLSA) prevents employers from taking deductions from an employee's check that reduce the employee's pay below the minimum wage of $5.15 per hour. Overtime compensation is disregarded when determining if a deduction reduces the employee's pay below the minimum wage.
Deductions for the reasonable cost of board, lodging and facilities provided to employees are allowed. However, these deductions cannot include profit to the employer and must not be for the sole benefit of the employer. Determining if a deduction is appropriate is extremely fact sensitive. For example, deducting the cost of laundering uniforms has been found improper when it is solely for the benefit of the employer or results in the employee receiving less than minimum wage. However, a deduction has been allowed when the employee receives the benefit of the laundering or her pay is not...