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October 08, 2010
Chargebacks and Employee Pay Deductions in Your Organization

Cheryl Orr and Heather Sager discuss chargebacks and employee pay deductions in a BLR webinar entitled ‘Wage Payments: What You Can and Can’t Legally Deduct from Employees’ Pay’. They provide the following information about chargebacks and employee pay deduction. What should an employer do when the following occur.

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  • An employee has been paid on commission
  • The sale for which the employee has been paid a commission has been cancelled by the customer:

Can an employer set off against future payments? State laws vary. However, almost all states allow for chargeback if it expressly states the conditions in which chargebacks apply and the employee agrees to these conditions in writing. The distinction is if the commission is full earned and the payment was not an advance against a future commission. In this case, a chargeback cannot occur. This distinction can make the guidelines associated with chargebacks somewhat difficult to determine. However, the commission plan should clearly specify how a commission can be earned. Clear and proactive communication on the front-end can help support deductions on the backend of the process. The employee should understand and agree to the specified details surrounding chargebacks in the organization before the employer proceeds to make such deductions.

Cheryl D. Orr, Esq. is a partner and co-chair of the national Labor and Employment Practice Group at Drinker Biddle & Reath LLP (www.drinkerbiddle.com). She concentrates her practice on defending employers against FLSA collective actions and state and federal wage and hour class actions.

Heather M. Sager, Esq. is also a partner in the Labor and Employment Practice Group at Drinker Biddle & Reath LLP. Sager focuses her practice on management-side representation in collective and class actions, with particular experience in wage and hour litigation under state and federal law, including representative claims brought under California Business & Professions Code Section 17200.

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