Claim your Copy of
Top 100 FLSA
Overtime Q&As
Your email address will not be published. Required fields are marked *
State:
Free Special Reports
Get Your FREE Special Report. Download Any One Of These FREE Special Reports, Instantly!
Featured Special Report
Claim Your Free Copy of Top 100 FLSA Overtime Q&As

We’ve compiled a list of the 100 most commonly asked questions we have received on the federal Fair Labor Standards Act (FLSA) overtime regulations.
Download Now!


This report, "Top 100 FLSA Q&As", is designed to provide you with an examination of the federal FLSA overtime regulations in Q&A format, including valuable tips for bringing your workplace into compliance in an affordable manner.

At the end of the report, you will find a list of state resources on wage and hour issues. This report includes practical advice on topics such as:
  • FLSA Coverage: How FLSA regulations apply to all employers and any specific exemptions from the overtime requirements
  • Salary Level: Qualifying for exemptions and nonexempt employees
  • Deductions from Pay: Deducting for violations, disciplinary reasons, sick leave, or personal leave


Download Now!
March 09, 2009
Deductions for Wage Overpayments in California: Strict Rules Apply
Suppose that your payroll system pays nonexempt employees for an assumed amount of hours, even when employee timesheets for that pay period haven’t yet been submitted. Sometimes, when you finally receive the timesheet data, you learn that one or more employees actually worked less than the assumed and paid amount.

Are you allowed to deduct the overpayment from a worker’s next paycheck? And, does the employee’s submitted electronic timesheet amount to a written authorization for the deduction? This was the scenario laid out in a recent employer request for an opinion from the California Division of Labor Standards Enforcement (DLSE). We’ll explain the DLSE’s position.

Deductions Can Be Legal

The DLSE opined that deductions like the one here can be legal. Specifically, periodic deductions from wages authorized in writing by an employee to recoup predictable, expected overpayments that occur as a consequence of the employer’s payroll practices don’t violate California law. The DLSE, however, stressed the following points and cautions:

1. Written authorization required. Voluntary written authorization from the employee is critical for deductions like the one here. The agency explained that Labor Code section 224 permits a deduction that doesn’t amount to a rebate or deduction from the standard wage arrived at through a union contract, wage agreement, or statute, so long as the deduction is authorized by the employee in writing. Furthermore, the deduction must be one that doesn’t violate the prohibition in Labor Code section 221 against unlawful collection of wages previously paid.

The DLSE pointed out that the deductions made in this case don’t amount to an illegal rebate or deduction, because the employer is simply recouping an overpayment of an ascertainable amount (that is, hours not worked in the prior pay period). What’s more, the employee is still receiving the full of amount of wages owed for the time worked.

However, cautioned the DLSE, an employee’s submitted timesheet, whether paper or electronic, doesn’t amount to written authorization for this type of deduction unless the timesheet “expressly and voluntarily authorizes a specific prospective deduction.”

2. Never deduct from final paychecks. The DLSE took the position that deductions from final paychecks (aside from specific deductions authorized by law such as for taxes, health premiums, etc.) are never permitted, even if the employee provides written authorization. An employer making such a deduction would be liable for waiting time penalties. The DLSE based its opinion on Labor Code section 203, which requires full payment of wages when an employee is discharged or quits. According to the DLSE, deducting from a final paycheck for prior overpayments violates the law because it deprives the employee of all final wages.

3. Don’t reduce pay below minimum wage. Finally, the DLSE stressed that a deduction to correct an overpayment is permissible only if employee still receives, after the deduction, not less than the minimum wage.

The new opinion letter is available online at www.dir.ca.gov/dlse/opinions/2008-11-25-1.pdf.

For a Limited Time receive a FREE Compensation Market Analysis Report! Find out how much you should be paying to attract and retain the best applicants and employees, with customized information for your industry, location, and job. Get Your Report Now!
Featured Special Report:
Top 100 FLSA Overtime Q&As
   
   
 
 
Twitter  Facebook  Linked In
Follow Us
WEBARRAY6
Copyright © 2014 Business & Legal Resources. All rights reserved. 800-727-5257
This document was published on http://Compensation.BLR.com
Document URL: http://compensation.blr.com/Compensation-news/Compensation/Deductions-from-Paychecks/Deductions-for-Wage-Overpayments-in-California-Str/