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January 18, 2010
"Help! Employees Owe Us Money"
Now and then, some of our subscribers encounter workers—often soon-to-be-former workers—who are irresponsible, or even dishonest. In a variety of ways, they can cost their companies money for unjustified expenses—money that is tricky for employers to recover. As you’ll see in these sample questions and replies, the answers are rarely easy.

Q: An employee was caught stealing. Can we deduct the cost of the stolen property from his last paycheck? Also, can we tell other employees why we fired this individual? He also tried to intimidate a co-worker into covering up his theft.

A: The law in your state allows you to deduct for breakage, loss, or theft only if you can show that your loss was due to the employee’s gross negligence, willful misconduct, or dishonesty. A simple accusation won’t do. As for your second question, there is no law prohibiting your telling other employees about the misconduct. But beware: If you do so, the former employee could file a suit for defamation. Even if you won the case, you’d still have to pay to defend yourself. And, reasons for some employee terminations may be protected by privacy or confidentiality requirements. But do take the opportunity to remind other employees of your policies regarding the use of company property and/or anti-theft policies.

Q: An employee has charged $9,400 of personal expenses on a company credit card. We intend to terminate her, but how much of those expenses can we recoup by deducting from her final paycheck? Further, we have no policy barring the use of company cards for personal expenses and no system for monitoring card use. Does that undermine our ability to fire this individual?

A: The law in your state permits no deductions from paychecks that aren’t authorized in writing by the employee, except those required by law or a court order. So your choices are few: You can file a civil suit to collect the money or simply write off the debt. Your termination letter could specify that the company card was misused, that’s why she’s being fired, and that she must repay the money to you by a certain date or you will sue her to recover it.

Q: We have allowed some employees to use vacation before they’ve accrued it, creating what we call a “negative vacation balance.” If someone quits before correcting the negative balance, can we deduct the money from his or her final paycheck? We operate in three states and want to create a policy that will cover all.

A: Although one of the states in which you operate permits some kinds of deductions that an employee has not authorized, negative vacation balances are not an authorized deduction. The other two states have no specific laws or regulations barring you from final paycheck deductions. The federal Department of Labor issued an opinion letter allowing such deductions so long as company policies have made it clear that use of unaccrued vacation will be treated like advance wages or salary and must be repaid.

Q: A new employee worked for us only 2 days when we discovered he’d been convicted of a felony and so had falsified his application. Do we have to pay him for those 2 days?

A: Yes, you must pay at least minimum wage for all hours worked. The Fair Labor Standards Act makes no exception for this situation.

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