• Nonexempt employees are not entitled to be paid for time that they did not work.
• The distinction between a uniform and a dress code leads to questions of payment for and provision of garments.

While the Fair Labor Standards Act (FLSA) allows nearly any deduction for nonexempt employees, there are some restrictions for exempt employees who must be paid on a salary basis. In addition, even nonexempt employees who are paid a salary may be subject to more restrictions than hourly employees.

Nonexempt (hourly) employees

The first issue to address is whether a failure to pay an employee constitutes a deduction from wages. For example, nonexempt employees are not entitled to wages during an absence because they are only paid for hours worked. If a nonexempt employee doesn’t report to work because of bad weather, the employer does not have to provide wages for that day because the employee didn’t work (regardless of whether the business was open or closed). This is not a deduction from pay because no wages were earned.

As noted previously, deductions are normally either for the employer’s benefit (such as tools, uniforms, or damages) or for the employee’s benefit (such as retirement plans or health insurance premiums). A deduction for the employer’s benefit cannot reduce employees’ wages to less than minimum wage.

Items primarily for the benefit or convenience of the employee may include deductions for health insurance, retirement plan contributions, charitable donations, and purchases of the employer’s goods or services via payroll deductions. In addition, meals provided by the employer are regarded as primarily for the benefit and convenience of the employee.

The question of which entity benefits is important because a deduction for the employee’s benefit can usually reduce the employee’s wages below minimum wage. For example, an employee who earns minimum wage could still elect to participate in a 401(k) plan, even though deferrals reduce the paycheck below minimum wage. Similarly, an employee who earns minimum wage could choose to purchase health insurance from the employer, even if premiums take up most of the wages earned.

On the other hand, expenses for the employer’s benefit (such as making the employee purchase a uniform) cannot be taken as a credit toward the minimum wage obligation. The FLSA recognizes that wages in-kind (that is, non-monetary compensation) can be applied toward the minimum wage.

Remember that the FLSA was passed in 1938, so it even lists items such as coal and lumber that might be given to employees in lieu of cash. However, providing an employee with a uniform does not benefit the employee, so if the employer requires the employee to bear the cost, it may not reduce the employee’s wage below minimum wage, nor may that cost cut into overtime compensation required.

For example, if an employee is paid the minimum wage of $7.25 per hour (effective July 24, 2009), the employer may not make any deduction from wages for the cost of the uniform nor require the employee to purchase the uniform out of pocket. However, if the employee were paid $7.75 per hour and worked 30 hours in a workweek, the employer could deduct $15.00 ($0.50 X 30 hours), or the amount above minimum wage.

Employers may prorate deductions over several paydays, provided the prorated deductions do not reduce the employee’s wages below the required minimum wage or overtime compensation in any workweek.

Items other than uniforms are treated much the same. Again, the question is usually which entity benefits: the company or the employee. Examples of items for the benefit or convenience of the employer include tools used in the job, damages to the employer’s property, financial losses due to customers not paying bills, and theft of the employer’s property by the employee or other individuals.

Employees may not be required to pay for any such items if, by so doing, their wages would be reduced below the required minimum wage or overtime compensation. This is true even if an economic loss suffered by the employer is due to the employee’s negligence.

Dress code or uniform?

Since employers may have to pay for a uniform but can generally establish any dress code they choose, this raises the question of the difference between a uniform and a dress code. For example, if employees are required to wear black or tan pants and a blue polo shirt, is this a uniform?

Probably not, because under federal and state wage laws, the term “uniform” has a specific meaning. It generally does not include “street clothing” such as khaki pants or similar articles commonly worn. Typically, the term refers to unusual items not suitable for daily wear.

For example, office employees could be expected to wear “business casual” clothing such as dress slacks and dress shirts, but this isn’t a uniform. However, if an employer requires something unusual (such as a bartender wearing a tuxedo shirt or Hawaiian shirt as part of the bar’s image), then the clothing may be considered a uniform because it’s unusual and not commonly worn as street clothing.

Many states restrict employers from making employees purchase or maintain a uniform (unless the employee agrees in writing to do so). However, if employees are required to wear black or tan pants of their own choosing, without a company logo or unusual style required, then it probably isn’t a uniform, just a dress code requirement.

The U.S. Department of Labor (DOL) Wage and Hour Division (WHD) has an opinion letter (FLSA2004-1NA, Garments as uniforms under FLSA) that determined khaki pants and a blue polo shirt were ordinary clothing and not uniforms under the FSLA. State agencies generally apply a similar standard, where a uniform means clothing of distinctive design or including a company logo.

So even though some laws restrict an employer’s ability to make employees purchase or maintain a uniform, a clothing requirement that describes common street clothes probably isn’t a uniform under such laws. Rather, it is a dress code, and employees can be required to provide or pay for their own clothing under a dress code.

In fact, providing an allowance to purchase street clothing can even be taxable income to the employee. According to the Internal Revenue Service (IRS), employers may reimburse employees (or directly pay for) distinctive uniforms or unusual apparel such as high-visibility clothing without increasing the employees’ taxable income.

However, giving employees money to purchase clothing suitable or readily adaptable for street wear could be taxable income to the employee (even if the article has a company logo, such as a polo shirt with a small logo).