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December 27, 2012
Legal experts answer questions about deductions from pay

BLR legal experts recently answered several questions about when an employer can deduct from an employee’s paycheck.

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Here are the responses in Q&A format:

Q: We have a new exempt employee who has called in sick but hasn’t accrued any leave time. Can we deduct the day from her check?

A: In short, yes, you may, but only if you do so for a full, rather than a partial, day. What makes this situation somewhat complicated is the Fair Labor Standards Act, which governs deductions for sickness and disability. It’s important to distinguish between deducting from an exempt employee’s paycheck and deducting from his or her allotted sick time; if he or she has accrued sick leave, you may deduct for a partial day’s absence. Note that in your state, California, at least one city (San Francisco) provides for paid sick leave.

Q: An employee has given us 2 weeks’ notice that he is quitting. But because he is joining a competitor, we want him to leave immediately. Do we need to pay him for the 2 weeks between his departure and his joining the new employer?

A: Yours is an "employment at will" state, meaning that either the employer or the employee is free to terminate the relationship at any time for any reason, with or without notice. That concept will prevail only if there is no collective bargaining agreement, individual employment contract or agreement, or personnel policy that creates a different relationship. In the absence of such, you can terminate.

But be cautious, as well, if the employee has ever complained of discrimination, harassment, or about wages or working conditions, because immediate termination might be interpreted as retaliation. If there are any such concerns, you may want to consult a local employment attorney. Finally, remember that if you choose to let the employee go without paying him for the 2 weeks’ notice, he may be successful in being granted unemployment compensation for that period. So you may want to pay him without requiring him to be in the office or work.

Q: An employee has resigned but failed to return company equipment he used on the job. Can we withhold his vacation pay until he returns the equipment? We operate in three different states.

A. We’ll go through each applicable state law, but you’d be wise to check with an attorney in each to ensure compliance. In New Jersey, payment for vacation depends on what you promised. If you said it would be provided/paid, you must do so unless there are written, contingent requirements that the employee doesn’t meet. And you can’t deduct from pay for failure to return equipment.

In Pennsylvania, promised vacation time is considered a fringe benefit payable within 10 days of termination. Given a written authorization from an employee or a collective bargaining agreement, however, you may deduct for purchase or repayment of goods, services, or facilities belonging to the employer.

In Maryland, payment for accrued vacation has not been required since 2008, provided the employer has a written policy to that effect that the employee has acknowledged and understood.

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