Unlawful Wage Deductions

Sometimes California employers make unlawful deductions from their workers’ paychecks. If you, or someone you know, suspect this is happening, it is important to consult with a knowledgeable wage and hour attorney to learn whether you have a valid claim.

California state statutes provide for particular scenarios during which paycheck deductions are prohibited and when there are exceptions to the general payroll deduction rules. For example, if a California employer requires employee uniforms or photographs, the employer must pay the cost of these requirements, instead of deducting the costs from the employees’ wages.

Likewise, if a bond is required on an employee, a California company is responsible for paying the cost. Moreover, if an employee legally requires a medical examination or if there is a pre-employment medical or physical examination, a California employer may not deduct this cost from an employee’s paycheck.

When Can an Employer Deduct My Wages?

There is an exception to these rules, however. Under California’s Industrial Welfare Commission Wage Order 9, a California employer is allowed to deduct uniform costs from an employee’s final wages if he or she does not return the uniform to the company and the employee had a prior written agreement agreeing to do so.

Furthermore, although California employers cannot take gratuities from employees that were left for a server at a restaurant, the establishment can have a tip-pooling policy among the employees that provide table service.

Unlawful Paycheck Deductions

In California, employers can only withhold sums from wages if state and/or federal law permits the deductions; the employee has expressly authorized the deduction, in writing, to cover insurance premiums or other specific deductions; or the deduction is to cover a pension, welfare, or health contribution that is expressly authorized by a wage or collective bargaining agreement.

California’s Industrial Welfare Commission (IWC) wage order lists additional restrictions. Among them is a restriction on an employer’s ability to make deductions from an employee’s wages due to equipment loss, equipment damage, and cash shortages. These deductions are not allowed. The exception to this rule, however, is when the employee’s gross negligence or dishonest willful act was the cause of the loss to the employer.

Notably, the accusation by a California employer against an employee by itself is not sufficient to permit a paycheck deduction. California courts have held that when an employee is merely ordinarily negligent or is not at fault, the employer must bear the loss as a cost of running the business.

If a California employer loans money to an employee and said employee authorized paycheck deductions for periodic installment payments in connection with the loan, these deductions may be allowed under state law. However, a lump sum payment deducted from a paycheck to recuperate an outstanding loan balance at the time employment is terminated is not allowed. This is true even if the employee provided written consent to the deduction.