The Department of Labor, the federal governing body on the issue of wage and hour laws in the United States, says that a salaried employee may not have his or her salary reduced to pay for an employer’s lost or damaged property.
A recent DOL opinion letter states that a “salary” is not subject to reduction for lost, damaged or destroyed property of the employer, even if the employee authorizes it. In fact, a salary is a fixed, guaranteed amount paid free and clear of potential reductions. If a salary were subject to deduction for reimbursement of lost or damaged property, it would no longer be a salary.
That is significant because to be exempt from overtime provisions of the federal Fair Labor Standards Act, any managerial or administrative employee must be paid on a salary basis. So, if a company deducts for a lost phone, broken computer, etc., the company would make the otherwise exempt employee nonexempt, and owe the employee for any overtime worked that week. This may not sound onerous, but some employers have found themselves liable for many weeks (even years) of overtime pay when they deducted small portions of amounts owed by employees from multiple paychecks.
Furthermore, DOL says that requiring the employee to reimburse the company out of his or her own pocket won’t work either. For an employee to be paid on a valid “salary” basis, that salary may not be subject to reduction for lost, damaged or destroyed property of the employer.
What about nonexempt (hourly) employees? Use caution here. A number of states have laws that forbid, or strictly limit, employer policies that require reimbursement for lost or damaged company tools or equipment. Other states require separate written agreements whereby the employee agrees to a deduction of any kind, and some states dictate certain parameters.
Mike Lissau, employment law expert with Hall Estill, provided content for this article. Email him at mlissau@hallestill.com.
This article originally appeared in The Business Owner Journal, the periodical of choice for owners of small and midsize private businesses. All rights reserved, D.L. Perkins LLC. © 2012.
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