Federal & State Regulations | Deductions from wages - California

Summary of differences between federal and state regulations

Federal regulations restrict the types of deductions that can be made from an employee’s wages or salary. Deductions can be made in certain cases, but the legality often depends on the nature and purpose of the deductions, as well as the status of the employee as exempt or non-exempt.

Under California law, an employer can lawfully withhold amounts from an employee’s wages only:

When required or empowered to do so by state or federal law, or
When a deduction is expressly authorized in writing by the employee to cover insurance premiums, benefit plan contributions or other deductions not amounting to a rebate on the employee’s wages, or
When a deduction to cover health, welfare, or pension contributions is expressly authorized by a wage or collective bargaining agreement.

The ability of an employer to deduct amounts from an employee’s wages due to a cash shortage, breakage, or loss of equipment is specifically regulated by the Industrial Welfare Commission Orders and limited by court decisions. In addition, there have been several court decisions that significantly restrict an employer’s ability to take an offset against an employee’s wages.

For more information, visit www.dir.ca.gov/dlse/FAQ_Deductions.htm.

California law (Labor Code §2802) also requires employers to indemnify employees for all necessary expenditures or losses incurred by the employee in performing job duties. This provision may limit allowable deductions, as well as the types of tools, equipment, or other expenses that employees can be required to bear.