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What Can My Employer Deduct from My Paycheck?

Contents

    Employers can only deduct certain things from employee wages. Generally, your employer can only deduct money from your paycheck if it is legally authorized or you voluntarily agree to it. Deductions should not reduce your wages below minimum wage. To learn more about legally required pay rates, read Getting Paid: Wage Laws and Common Violations.

    Authorized and Voluntary Deductions

    The federal Fair Labor Standards Act (FLSA) and Michigan’s Payment of Wages and Fringe Benefits Act (PWFBA) allow employers to take legally authorized and voluntarily agreed upon deductions from your paycheck. Examples of legally authorized deductions are:

    • Income tax withholdings

    • Social Security and Medicare taxes

    • Certain meal, housing, and transportation expenses

    • Debts owed to the employer, like for pay advances, loans, or misappropriated funds

    • Court-ordered wage garnishments

    • Debts owed to the government

    • Child support and alimony

    Deductions that employees can agree to are:

    • Union dues

    • Charitable contributions

    • Insurance premiums

    • Retirement contributions

    Overpayments

    Overpayments of wages or fringe benefits paid directly to an employee can be deducted by the employer. No written consent is needed if all of the following conditions are true:

    • The deduction is made within six months of the overpayment;

    • The overpayment is the result of a miscalculation, typo, or other clerical error;

    • The employer gives the employee a written explanation of the deduction at least one pay period before the deduction is made;

    • The deduction is not more than 15% of the gross wages earned for that pay period; and

    • After all other required and authorized deductions are made, the deduction for the overpayment does not reduce the employee's hourly gross pay rate for that period below the minimum wage.

    Deductions for the Benefit of the Employer

    Problems with deductions happen when employers make deductions for their benefit, rather than to benefit their employees. For example, the FLSA prohibits deductions that are made “for the employer’s benefit or convenience” when the deduction reduces employee wages below the federal minimum wage. The PWFBA also prohibits any deductions “for the benefit of the employer” that reduce wages below Michigan’s minimum wage. The PWFBA also requires the employee to agree in writing before any deduction is made.

    The FLSA and PWFBA also prohibit indirect deductions. Indirect deductions can be for expenses and other items you are charged that primarily benefit your employer. An example could be if you are a bartender and your employer makes you buy a specific wine bottle opener with your employer’s name on it. Such charges are not allowed when they reduce your wages below minimum wage.

    Deciding whether a deduction is mostly for the employer’s benefit is complicated. If you believe your employer has made this type of deduction, you may want to call the Michigan Wage and Hour Program, the U.S. Wage and Hour Division, or speak with a lawyer. You can use Find a Lawyer to find lawyers and legal services in your area.

    Required Purchases and Reimbursement for Employer Losses

    Sometimes employers make their employees pay for certain things associated with their jobs and deduct the cost from the employees’ pay. Examples are:

    • Name tags

    • Purchase and cleaning of non-generic uniforms required for the job

    • Tools and equipment used in the employee's work

    • Lost or stolen inventory

    • Mandatory check cashing fees

    • Customers leaving without paying for goods or services (cash register shortages and store losses)

    • Broken or damaged equipment

    • Some meal, lodging, and transportation expenses

    Generally, employees may not be forced to pay for these things if it causes their wages to fall below minimum wage and overtime rates. However, employers can often charge for these things when it does not reduce wages below minimum wage. Employers can also prorate (divide) charges over several paychecks as long as the charges do not reduce wages below minimum wage for any single week.

    Illegal Deductions

    If deductions or employer charges have reduced your wages below minimum wage, you have rights. You can file a complaint with the U.S. Wage and Hour Division or Michigan’s Wage and Hour Program. You can also file a lawsuit in federal or state court. When deductions have been made without your prior written consent, you can file a complaint with Michigan’s Wage and Hour Program.

    To learn more about your options, read Filing a Complaint with the Michigan Wage and Hour Program, Filing a Complaint with the U.S. Wage and Hour Division, and Filing a Wage Lawsuit in State or Federal Court. You can also use our Do-It-Yourself Wage and Hour Forms (coming soon) to find out which option is best for you.

    Employee Liability

    In some cases your employer can sue you for damages that resulted from your actions. These cases are different from deductions. In order to win, your employer must prove that the loss was caused by your intentional or negligent actions. If you did something illegal (like steal), you might be prosecuted, too.