When an employer and employee enter into a contract, both sides have expectations of the other that dictate the working relationship. Employers expect employees to complete the job and work the proper number of hours.

Employees expect to be paid for the hours they work. Unfortunately, employers may refuse to pay a portion of employees’ paychecks for various reasons.

Legal Reasons for Withholding Pay

While strict regulations govern the withholding of employee wages, there are specific circumstances under which an employer can legally withhold a portion of an employee’s pay.

These include:

  • Voluntary Deductions:
    • Employee Consent: Employers can deduct from an employee’s paycheck if the employee has given written consent. These deductions might include contributions to retirement plans, health insurance premiums, union dues, or charitable donations. It’s important for employees to be aware of and agree to these deductions.
  • Court Orders:
    • Garnishments: Employers must withhold wages if there is a court order for garnishments. This fulfills obligations such as child support, alimony, unpaid taxes, or debt repayments. The employer must follow the court’s instructions regarding the amount and duration of the garnishment.
  • Employee Benefits:
    • Pre-Tax Benefits: Deductions for benefits like health insurance, dental insurance, vision insurance, and flexible spending accounts (FSAs) are often taken pre-tax. Employees usually agree to these deductions when they enroll in benefit programs.
    • Post-Tax Benefits: Some benefits, such as life or disability insurance, may be deducted after taxes. These also require employee consent.
  • Repayment of Advances:
    • Salary Advances or Loans: If an employer has provided an advance on salary or a loan to an employee, they can legally deduct repayments from the employee’s future paychecks, provided there is a clear agreement outlining the repayment terms.
  • Mistakes in Overpayment:
    • Payroll Errors: If an employer accidentally overpays an employee, the excess amount can be recovered by deducting it from future paychecks. Employers must notify employees about the error and repayment plan.
  • Employee Purchases:
    • Uniforms and Equipment: If an employee has agreed to pay for uniforms, tools, or equipment necessary for their job, these costs can be deducted from their wages. However, such deductions cannot reduce the employee’s pay below the minimum wage.
    • Company Property: Deductions for lost or damaged company property may be allowed if the employee has agreed to these terms, usually in writing.
  • Taxes:
    • Federal and State Taxes: Employers are legally required to withhold federal and state income taxes, Social Security, and Medicare taxes from employees’ wages. These withholdings are mandatory and based on the information provided by employees on their W-4 forms.
  • Workers’ Compensation and Unemployment Insurance:
    • Required Contributions: State laws mandate that employers deduct required contributions to workers’ compensation and unemployment insurance funds.
  • Training or Certification Costs:
    • Reimbursement Agreements: If an employer has paid for an employee’s training or certification, and there is a signed agreement that the employee will reimburse the cost if they leave the company within a certain period, deductions can be made according to the terms of that agreement.
  • Union Dues:
    • Collective Bargaining Agreements: In workplaces with union representation, employers can deduct union dues from employees’ paychecks if stipulated in the collective bargaining agreement and with the employee’s consent.

Common Illegal Reasons for Withholding Pay

Employers are required by law to pay employees for the work they do. However, there are instances where employers might unlawfully withhold pay. Understanding these illegal reasons can help employees identify when their rights have been violated and take appropriate action.

Retaliation

Employers may illegally withhold pay as a form of retaliation against employees who exercise their rights. For example, if an employee files a complaint about unsafe working conditions, reports discrimination, or engages in union activities, an employer might unlawfully withhold wages as punishment. Retaliation is strictly prohibited under labor laws, and employees subjected to such actions have the right to seek legal recourse.

Discrimination

Withholding pay based on discrimination occurs when an employer withholds wages from employees due to their race, gender, age, religion, disability, or other protected characteristics. Discriminatory withholding of pay is a serious violation of employment laws, and employees can file a complaint with the Equal Employment Opportunity Commission (EEOC) or seek legal assistance to address the issue.

Payroll Errors

While mistakes in payroll processing can happen, consistently failing to correct these errors and withholding pay can be illegal. Employers are responsible for ensuring that employees receive accurate and timely payments. Repeated errors that result in unpaid wages must be addressed promptly, and failure to do so can lead to legal consequences.

Failure to Pay Overtime

Employers may unlawfully withhold pay by not paying employees for overtime hours worked. According to the Fair Labor Standards Act (FLSA), non-exempt employees are entitled to overtime pay at a rate of one and a half times their regular rate for hours worked over 40 in a workweek. Employers who deny rightful overtime pay are violating federal labor laws.

Misclassification of Employees

Employers sometimes misclassify employees as independent contractors to avoid paying benefits and overtime. This misclassification can result in employees not receiving their full wages. Incorrectly classified employees may be entitled to back pay and other compensation for lost wages and benefits.

Unauthorized Deductions

Employers may also withhold pay through unauthorized deductions from an employee’s paycheck. Deductions for reasons such as cash register shortages, damaged property, or uniforms must be explicitly authorized by the employee or permitted by law. Unauthorized deductions are illegal, and employees can seek restitution for these withheld amounts.

Withholding Final Paychecks

Employers might unlawfully withhold an employee’s final paycheck after they leave the company. State laws vary, but generally, employers are required to pay departing employees promptly. Failing to provide a final paycheck on time can result in penalties and legal action.

If You Need Legal Help, Contact Fieger Law Today

In any situation where wages are illegally withheld, the employee can take legal action against the employer to seek the funds they earned. Our Michigan employment law attorneys at Fieger Law are here to help!

We hold employers accountable when they refuse to pay wages that employees have rightfully earned. Employers who have wrongfully withheld pay should be held accountable. There’s no telling how many employees have fallen victim to the employer’s unscrupulous actions.

If you haven’t received pay for hours you lawfully worked, call our firm at (800) 294-6637 to speak with our team about your needs.

Originally published May 14, 2019.