Federal & State Regulations | Deductions from wages - North Carolina

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 North Carolina law, an employer may only withhold or deduct from an employee’s wages under the following conditions:

(1) The employer is required or empowered to do so by State or federal law;

(2) When the amount or rate of the proposed deduction is known and agreed upon in advance, the employer must have written authorization from the employee which

is signed on or before the payday(s) for the pay period(s) from which the deduction is to be made;
indicates the reason for the deduction; and
states the actual dollar amount or percentage of wages which shall be deducted from one or more paychecks. Provided, that if the deduction is for the convenience of the employee, the employee shall be given a reasonable opportunity to withdraw the authorization

(3) When the amount of the proposed deduction is not known and agreed upon in advance, the employer must have written authorization from the employee which is signed on or before the payday(s) for the pay period(s) from which the deduction is to be made, and indicates the reason for the deduction.

Prior to any deductions being made, the employee must:

receive advance written notice of the actual amount to be deducted;
receive written notice of their right to withdraw the authorization; and
be given a reasonable opportunity to withdraw the authorization in writing.

(4) An employer may withhold or divert a portion of an employee's wages for cash shortages, inventory shortages, or loss or damage to an employer's property after giving the employee written notice of the amount to be deducted seven days prior to the payday on which the deduction is to be made, except that when a separation occurs the seven-day notice is not required.

(5) An overpayment of wages to an employee as a result of a miscalculation or other bona fide error, advances of wages to an employee or to a third party at the employee's request, and the principal amount of loans made by an employer to an employee are considered prepayment of wages and may be withheld or deducted from an employee's wages. Deductions for interest and other charges related to loans by an employer to an employee require written authorization, however.

(6) The withholding or diversion of wages owed for the employer's benefit must comply with the following requirements:

In nonovertime workweeks, an employer may reduce wages to the minimum wage level.
In overtime workweeks, employers may reduce wages to the minimum wage level for nonovertime hours.
No reductions may be made to overtime wages owed.

For further details and examples of agreements, see the state website at:

www.labor.nc.gov/workplace-rights/employee-rights-regarding-time-worked-and-wages-earned/deductions-wages