When Can You Withhold Money from an Employee’s Check?

Paycheck DeductionsWe often field questions from our clients about issues relating to employee pay.  Here are some examples of recent questions we’ve had. 

  • “I just realized we’ve been paying a new employee $12.00 per hour instead of the $11.00 that we offered them.  Can we deduct the overpayment from their next check?”
  • “My employee often fails to balance their till at the end of their shift.  Can I withhold their shortage from their check if I tell them in advance that I’ll be doing that?”

When a separation of employment occurs, employers realize it’s their last chance to settle the financial score, and the following types of questions occur:

  • “An employee just walked off the job and they still have a company cell phone, laptop and key to the office.  Can we withhold their final paycheck until they return these items?”
  • “Our business advanced an employee $250 so they could pay their rent.  They’ve stopped coming to work.  Can we repay the company from their final check?”

It’s easy to see how unique paycheck issues can arise.  So, how do we handle these issues without stepping into legal mud puddles?

Know your wage laws, or pay a steep price:

The state’s Department of Labor & Industries is tasked with enforcing rules and regulations relating to workers’ wages.  In 2011, the L&I collected $1.9 million in unpaid wages for employees from Washington businesses.  Pay issues can be contentious and litigious.  But when the regulators are in charge, better to know the rules upfront than to pay the penalties after the fact!

In most cases during the employment period, you are only allowed to deduct from an employee’s wages up to the point where they are still paid minimum wage.  But there are some exceptions to this.

  • If an employee has enrolled in an employer-sponsored benefits plan, the associated deductions may be taken.
  • If you have loaned money to an employee, or provided them with a payroll advance, you may take the repayment from their paycheck.
  • You can also charge the employee interest on the loan, as long as it is a reasonable amount.

Be sure the employee has provided written authorization for all of these deductions!

What can you do if you over-pay an employee?

Regarding the issue of overpayment due to paying an employee a higher wage than agreed upon, under Washington law, you may, in most circumstances, recoup the overpayment.  It must be for either the wrong wage or for the wrong number of hours — you cannot tell an employee their work was substandard and they’re not worth what you paid them.

You have 90 days from the first overpayment to detect it and implement a repayment plan.  You must provide the employee with advance written notice prior to making the adjustment.

Can you dock an employee’s pay for shortages in their till?

Can you tell employees that you’ll be docking their pay for shortages in their till?  The answer to that is a qualified no.

The only time you are allowed to do this is on their final paycheck.  And in this case, there must be established policies the employee is aware of, and the employee must have counted the money in the till prior to and and after their shift, and have been the only person who had access to the cash register during their shift.

The same policy applies to:

  • Breakages
  • Damage to equipment
  • Acceptance of bad checks in violation of a company policy

In all of these circumstances, a deduction may be made only if there is a prior agreement, the incident happened in the final pay period, and the reduction never reduces an employee’s pay below minimum wage.

Can you withhold a final paycheck to force an employee to return company property?

So what about those final paychecks?  Washington’s law requires terminated employees to be paid at the next regularly scheduled pay day.

While you do not have to hand them a paycheck on their last day of work, you may not withhold their paycheck until they have returned company property.  In fact, if you do fail to pay your terminated employee on time, they may sue you in civil court and be entitled to double damages.

If your employees are issued company property, such as safety equipment, laptop computers, cell phones, etc., you should have them sign an agreement that they will return these items upon their termination.

This agreement should contain:

  • Information about the monetary value of the items
  • Terms stating that the employee will repay the company for any items not returned
  • Acknowledgement that this amount can be withheld from their final check

Just remember, for this type of deduction, you cannot reduce their pay below minimum wage.  Small claims court may be your best bet for the rest of the money.

Recovering money from employee payroll advances:

In this economy, businesses sometimes find themselves giving employees payroll advances to help them out with short term financial shortages.  If you do this, document it in writing with the employee’s agreement.  You are able to recover the unpaid portion from a final paycheck, even if the employee’s pay drops below minimum wage.

The wrap-up:

The Department of Labor & Industries will not intervene on conflicts arising about employee benefits.  Sometimes, employers balk at paying unused sick time or vacation time to a departing employee who is leaving under less than optimal circumstances.

While L&I will not become involved, keep in mind that you must follow your company’s policy in a nondiscriminatory manner.  A disgruntled former employee can always sue in small claims court for unpaid employee benefits.

We all remember that old slogan, “You can pay me now, or you can pay me later.”  When you’re dealing with money, it’s easy for emotions to become involved and situations to escalate.  Understanding and following the rules helps everyone know what to expect.

22 Responses to “When Can You Withhold Money from an Employee’s Check?”

  1. dedee

    I worked at a Casino and all employees are to balance the vault. The employee who balanced the vault after me said it was bal and ok. The manager told me 3 days later that it wasn’t bal and I owed $100. I asked her to show me the paper trail and proof of it or to let me look at it and explain what I did. she said I was fired and that I owed another $40.00 for a shortage on a til. I asked for her to show it to me and she denied it to me. I went above her and asked to show me proof of shortage and was denied. now they have stop direct deposit of my check and have kept it for payment with out showing me any kind of paper work and an employee has agreed with me that there is no paper work on any of this shortage they pinned on me. What can I do about this? on other apps for jobs they ask about being terminated and explain why, I am not guilty of what they claiming and will now not be trusted by other possible employers and fear will not be able to find work because of this. Please HELP! is there any thing that can be done?

  2. Julie Tappero

    If you are in Washington State, contact the Department of Labor & Industries with your concern. They will help you to recover your lost wages. If you are in another state, contact the state agency that administers your state’s wage and hour laws. They should be able to assist you. Wage and hour laws will vary by state. Good luck.

  3. E Mendoza

    I have employees that cannot complete their time sheets correctly. I end up spending several hours every two weeks following up behind them having them change their time sheets to match the correct hours they worked and correct mileage they drove.
    Since I am the one responsible for turning in their hours can I stop their paycheck from being issued temporarily until they correct their time sheets?
    How do I handle this?

  4. Brianna

    Our store closed down and our check has not been processed to us it has been now two weeks they state the checks will not be returned because of missing merchandise can they withhold our check when they are accusing us of false accusations?

  5. Lora

    No. It is not legal for your employer to hold your check based on the information you provided. You might go them initially and request again, in good faith, but inform them if they refuse to pay you, it is your duty to report non-payment for hours worked to Labor & Industries.

  6. bridgitte c

    Hi I had two questions I live in Maine but work in Conway new Hampshire for two companys both in the cleaning industry for vacation rentals the first job was with first almost 1 1/2 got done waited while first my check which was what ever but I had 56 hours of paid vacation time with we could be paid out for or take as long as we gave a two weeks notice if wanted paid out so I chose paid out witch I didn’t get paid out and they let me go within three weeks of ke putting me request in is there anything I could do everyone else got paid or was able to take it we had contracts it got 30 hrs for being there over a yr the rest was because we had to work all summer with taking absolutely NO TIME OFF NOT EVEN APPOINTMENTS so to not be paid out I was upset as I had four kids i missed the whole summer with looking for my extra money to later do something with them ??? Second the next job i was with them for 7 months one day went to work said they no longer could afford me but i know it’s more then that because of the attitude the harrassment the owner keeps doing to me on my phone and also it’s been a month and I still haven’t received my check what can I do ??

  7. Lora

    If you were in Washington State, I would say to contact the Department of Labor & Industries with your concern. They would help you to recover your lost wages. However, it sounds as though you are in Maine or New Hampshire. You need to contact the state agency that administers your state’s wage and hour laws. They should be able to assist you. Wage and hour laws will vary by state. Good luck.

  8. Shawn Lasater

    Can an employer hold a check from you if you have not received a copy of your SSI number and because of the COVID-19 the office is not open.

  9. Mindy Hofstetter

    My daughter is a dog groomer in Hinsdale IL. The owner makes each groomer give the dog bather 2.50 from their own money on every groom. Many times, the bather doesn’t have time to bathe and dry every dog, yet the individual groomers are still forced to pay him even when they do the bathing , etc themselves. Is this legal? My daughter has never signed anything consenting to this

  10. Cody

    I have just quit my job and one of my co workers lend me a 100$ . I am currently broke and cant pay him back. They said they are witholding my finale paycheck until i pay him back. Can they do that.

  11. Mary Ann

    In the state of kansas, if your employer pays for a class to further your career with them and says you have to stay 6 months from the day you get your certificate or you have to pay it all back, if you quit or get fired can they legally keep your last check?

  12. Daniel

    I have a question. Today my pay check was short. I asked my employer why and she said she did not pay me some wages to get my attention because I was apparently not listening. I am a hard worker and always do my job. I don’t know what I was not listening to. I then called the president of my company and he forced her to write me a check for the missing wages. Can she legally do that to me? I I live in Florida.

  13. Yvette wilson

    I work for a fast food restuarant. During this time I ended up having to utilize medical insurance. For about a month an a half now my employee stayed I’m behind in my premium and has held my check with out notice is that legal to due

  14. Lora

    It is not be legal to withhold pay unless there is a written agreement between the employer and employee. Check your initial job offer documents or contract. I am not familiar with Florida state payroll laws. It would be good for you to contact L&I in Florida. Best of luck to you!

  15. Lora

    It is not legal to withhold employee pay for hours worked. It would behoove you to contact L&I in your state to direct you.

  16. Lora

    It is not legal for an employer to withhold pay for hours worked. It would behoove you to contact L&I in your state for further direction.

  17. Lora

    If you opted for the medical plan offered through your employer and that includes a deduction for the premium, yes, it is legal for them to deduct that amount from your paycheck. Contact your company’s HR department to find out when you can withdraw from the plan, if that is your desire. It usually requires a change in personal status, such as a divorce, birth of a child, change from full time to part time hours, etc., or can be taken care of during your benefit plan’s open enrollment period.

  18. Lora

    I am not familiar with Illinois payroll laws. My advice would be to contact your state’s L&I office. Best of luck.

  19. Lora

    If you signed a contract stating that you would remain in the position for a period of 6 months, based on the company’s providing for your specialized training and or certificate, or they would deduct that cost from your pay, it is legal. If there is no such contract, it likely is not. However, I am not familiar with employment/payroll laws in your state. Please contact your local L&I department for further direction.

  20. Lora

    Although I am not familiar with Florida state wage and hour laws, it certainly doesn’t sound as though your employer/supervisor’s actions were legal nor condoned by the company president. Thankfully the issue seems to have been rectified. In the future, it would behoove you to contact your state’s L&I department for direction. Best of luck to you.

  21. Bb

    Hi. My employer just notified me that they made a mistake by paying me full time wage for part time hours. I work 3 days a week and they said I’m listed as salary exempt and shouldn’t be? Anyhow my offer letter that I agreed upon has the salary on there, that is apparently the full time salary “on accident”. Now they want to cut my pay hourly to a little more than half of what I am getting. I do love my job but this is a huge payout. What to do?

  22. Lora

    It depends. If the offer letter indicates a salary based on FT work (40 hours per week) and yet you are only required to work 3 days a week, It seems fair to assume an error was made on the offer letter, and pay may need to be adjusted due to the change in your working schedule. If however you were offered and accepted that amount clearly understanding it was for a 3 day work week, and now they are saying they made an error, you may have good reason to dispute the decision. I would certainly let them know that you accepted the position (pay) as stated in the offer letter. That you would not have accepted the position were it paying less than the agreed upon amount. If they insist that an error has been made and they must reduce your pay rate, you could feasibly protest due to breach of contract. Your best move would be to contact your local Labor and Industries office and ask for direction in this matter. Best of luck to you.

Leave a Reply