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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.
Under Oregon law, employers may legally deduct the following from employee wages:
- Deductions required by law such as taxes or garnishments.
- Deductions that are for the employee’s benefit such as health insurance premiums. The employee must sign a written authorization and the deductions must be recorded in the employer’s books and records.
- Other deductions authorized by the employee in writing as long as the employer is not the ultimate recipient of the money, such as charitable contributions.
- Deductions authorized by a collective bargaining agreement to which the employer is a party.
- Deductions for processing garnishments (a fee cannot be collected if garnishment is 25% of disposable earnings).
- A deduction from a final paycheck for a cash loan to an employee, if the employee has voluntarily signed a loan agreement, and the loan was for the employee’s sole benefit. A deduction from the final paycheck for repayment of a loan may not exceed 25 percent of the employee's disposable earnings OR the amount of disposable earnings in excess of $218 per week, whichever is less.
Payroll deductions may not be taken for till shortages and bad checks taken contrary to company policy. Employers should communicate policies and procedures clearly to employees. Employees who fail to follow procedures may be subject to disciplinary action. It is unwise to assume that an employee has been dishonest. However, discipline up to and including termination may be taken if an employee does not follow policies. The violations could be characterized as “failure to balance till accurately,” or “failure to follow company policy requiring appropriate identification when accepting checks.”
Payroll deductions may not be made if an employee is negligent and destroys company property. Disciplinary action may be taken and the employer could pursue reimbursement for damages through the court system. A signed authorization from the employee would not be valid since this type of deduction is not permitted by statute.
Payroll deductions may not be taken for any item required to perform the job, like the purchase of uniforms or tools. An employer can, however, require employees to purchase uniforms or tools that are required to perform the job, but minimum wage employees may not be required to purchase these items. The only exception is the requirement of a “generic uniform” which a minimum wage employee may be required to provide. An example of a generic uniform is a black skirt/pants and white blouse/shirt suitable for street wear. Payroll deductions are not permitted.
Employees who receive more than minimum wage may be required to purchase required items as long as a purchase does not take an employee below minimum wage in the pay period in which it was purchased. Also, the cost of the item may not be averaged over more than one pay period. Again, payroll deductions are not permitted.
When meals and lodging are for the private benefit of the employee, an employer can take payroll deductions. In that case, meals and lodging purchased by the employer may be deducted from the paycheck as long as the employee has voluntarily signed an authorization. When the employee lives on the employer’s premises as a job requirement, lodging is not for the employee’s private benefit. In this case minimum wage must be paid in addition to the value of the lodging. As long as minimum wage is not violated, the employee may authorize payroll deductions for lodging.
Payroll deductions are not permitted if an employer loans an employee money to purchase tools, equipment, or any items that are required to perform the job. However, employees may be required to purchase these items in cash as long as the purchase does not reduce the employee below minimum wage in the pay period. Even if the employee owns the items when employment terminates, the deduction is still prohibited.
An employee can authorize the employer to deduct regular payments for items purchased from the employer for the employee’s personal benefit, such as items charged when the employer is a retailer, or hospital stays and procedures when the employer is a hospital. The applies only when the items are for the benefit of the employee and the deduction authorization is signed.
An employer may deduct for processing garnishments. An employer may collect a $1 processing fee for each week of wages. This fee must be collected after the last payment is made under the writ.
An employer may not take a deduction for a medical exam or for the cost of providing a health certificate required by the employer.
State
Contact
Bureau of Labor and Industries Wage and Hour Division
Regulations
Oregon Revised Statute §652.610, Itemized statement of amounts and purposes of deductions required
www.oregon.gov/boli/TA/pages/t_faq_tadeduc2.aspx
Oregon Revised Statute §659A.306, Requiring employee to pay for medical examination as condition of continued employment prohibited; exceptions
www.oregonlegislature.gov/bills_laws/ors/ors659a.html
Oregon Administrative Rules, Bureau of Labor and Industries, Division 20, Wages
http://arcweb.sos.state.or.us/pages/rules/oars_800/oar_839/839_020.html
Federal
Contact
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