Deductions from pay are generally regulated under both federal and state law. Under the Federal Fair Labor Standard Act (FLSA), an employer may deduct the "reasonable cost" of providing the following items even if the employee's cash wage drops below the federal minimum wage: (1) federal, state, or local taxes, (2) meals, lodging, and other facilities, (3) transportation provided by the employer, (4) fuel and merchandise, (5) instructional costs, and (6) deductions that benefit the employee. The employer may also make certain other deductions, as long as the deductions do not reduce the employee's pay below minimum wage: (1) shortages, (2) personal use of company car, (3) uniforms, and (4) tools.

Employers may make disciplinary deductions (i.e., fines for tardiness, rule violations, or poor work) under the FLSA (29 CFR 778.304). However, these deductions will violate the law if they bring an employee's pay below minimum wage. (29 CFR 778.307). Rules related to deductions from the pay of an exempt employee are very strict and such deductions should generally not be made.

Many states also regulate wage deductions much more strictly than the federal government. As such, the law most advantageous to the employee will control. A fine such as the one described in your question is the legal equivalent of taking a deduction from an employee's pay. For a more detailed answer, please respond to this email and provide us with the state in which your organization is located, and we will be happy to look further into the matter for you.

Wage and hour law is complicated, and violations may be costly. As such, it may be wise to consult a local attorney before deciding to implement any policy on fines or deductions. Guidance may also be obtained from your state labor department or equivalent state agency.