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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.
Colorado Wage Law permits employers to make specific wage deductions in the following areas. In all cases, however, a deduction may not reduce the employee’s paycheck to less than minimum wage for all hours worked.
Permissible deductions
1. Deductions required by local, state, or federal law. Examples include, but are not limited to, deductions for taxes, social security, FICA requirements, Medicare, garnishments, or any other court-ordered deductions.
2. Deductions for automatic enrollment in a retirement plan.
3. Deductions by written agreement between the employer and employee. The agreement may be for loans, pay advances, goods or services, and equipment or property. The agreement must be in writing, enforceable, and not in violation of law.
4. Deductions necessary to cover the replacement cost of a shortage due to theft by an employee. Colorado law provides the following criteria for deductions related to theft:
- A report must be filed with the proper law enforcement agency.
- If criminal charges are not filed against the accused employee within 90 days after the filing of the report, or the accused employee is found not guilty in a court action, or the charges are dismissed, the accused employee shall be entitled to recover any amount wrongfully withheld plus interest.
- If an employer acts without good faith in making such charges, in addition to the amount wrongfully withheld, the employer could be held liable for three times the amount wrongfully withheld plus attorney’s fees, court costs, and other costs the court finds reasonable.
5. Deductions that are authorized by the employee and that can be revoked. Examples include, but are not limited to, deductions for insurance benefits, savings plans, stock purchases, voluntary pension plans, charities, and deposits to financial institutions.
6. Deductions for union dues. Must be in writing between the employer and employee.
7. Deduction for the amount of money or the value of property that the employee failed to properly pay or return to the employer in the case where a terminated employee was entrusted during his or her employment with the collection, disbursement, or handling of such money or property. In this instance the employer shall have 10 calendar days after the termination of employment to audit and adjust the accounts and property value of any items entrusted to the employee before the employee’s wages or compensation shall be paid in accordance with C.R.S. 8-4-109.
Examples of illegal deductions
1. Property damage
Absent a written agreement to the contrary, employers may not deduct from an employee’s wages or compensation for the cost of damage or depreciation to the employer’s property. For example, an employer may not deduct the cost of damage to a company car from an employee’s wages, unless an enforceable written agreement existed between the employer and employee that was not in violation of the law.
2. Certain fines for employee behavior or actions
Employers may not apply fines to an employee’s earned wages or compensation based upon employee behavior or performance. For example, an employer may not deduct from the wages of a restaurant waitperson for the cost of a meal in the event that the customer does not pay the bill.
Federal
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Regulations
For non-exempt employees:
29 CFR Part 531, Wage Payments under The Fair Labor Standards Act of 1938
For exempt employees:
29 CFR Part 541, Subpart G, Salary Requirements