Although a wage garnishment is a lawful deduction from wages under Labor Code Section 224, an employer cannot discharge an employee because a garnishment of wages has been threatened or if the employee’s wages have been subjected to a garnishment for the payment of one judgment.
The ability of an employer to deduct amounts from an employee’s wages due to a cash shortage or breakage or loss of equipment is specifically regulated by the IWC Orders and is limited by court decisions. An employer cannot legally make deductions from an employee’s wages if, by reason of mistake or accident, a cash shortage, breakage or loss of company property or equipment occurs. The California courts have held that losses occurring without any fault on the part of the employee or that are merely the result of simple negligence are inevitable in almost any business operations and thus the employer must bear such losses as a cost of doing business.
There is an exception allowing an employer to make deductions from an employee’s wages for any cash shortage or breakage or loss of equipment if the employer can show that the shortage or breakage or loss is caused by a dishonest or willful act or by the employee’s gross negligence.
Some common payroll deductions often made by employers that are unlawful include:
∙ Gratuities. An employer cannot collect, take, or receive any gratuity or part thereof given or left for an employee, or deduct any amount from wages due an employee on account of a gratuity given or left for an employee. However, a restaurant may have a policy allowing for tip pooling or sharing among employees who provide direct table service to customers.
∙ Photographs. If an employer requires a photograph of an applicant or employee, the employer must pay the cost of the photograph.
∙ Bond. If an employer requires a bond of an applicant or employee, the employer must pay the cost of the bond.
∙ Uniforms. If an employer requires that an employee wear a uniform, the employer must pay the cost of the uniform. The term “uniform” includes wearing apparel and accessories of distinctive design and color.
∙ Business expenses. An employee is entitled to be reimbursed by the employer for all expenses or losses incurred in the direct consequence of the discharge of the employee’s work duties.
∙ Medical or physical examinations. An employer may not withhold or deduct from the wages of any employee, or require any prospective employee or applicant for employment, to pay for any pre-employment medical or physical examination taken as a condition of employment; nor may an employer withhold or deduct from the wages of any employee, or require any employee to pay for, any medical or physical examination required by any federal or state law or regulation or local ordinance.
Garnishments and bankruptcy. A garnishment is defined as a judicial procedure through which an employee’s wages are required to be withheld for payment of a debt.
Organizations are permitted to make deductions from an employee’s paycheck for the purposes of complying with bankruptcy court orders and garnishment (usually for child or spousal support). An organization cannot discharge an employee because a garnishment of wages has been threatened or if the employee’s wages have been subjected to a garnishment for the payment of a judgment.
Under section 706.011 of the Code of Civil Procedure, the maximum amount of an individual’s disposable income to a garnishment withholding order during any workweek, may not exceed the lesser of:
∙ Twenty-five percent of the individual’s disposable earnings ( the portion of an individual’s earnings that remains after deducting all amounts required to be withheld by law) for that week; or
∙ The amount by which the individual’s disposable earnings for that week exceeds 40 times the state minimum hourly wage in effect at the time the earnings are payable.
∙ 25 percent of an individual’s weekly disposable earnings; or
∙ The amount by which the disposable earnings for the week exceed 40 times the state minimum hourly wage in effect.
Employers who pay employees on less than a weekly basis must use the following multipliers in order to determine the proportional maximum amount of disposable income subject to withholding:
∙ For a daily pay period, the amounts shall be identical to the amounts described in subdivision (a).
∙ For a biweekly pay period, multiply the state hourly minimum wage by 80 work hours.
∙ For a semimonthly pay period, multiply the state hourly minimum wage by 86 2 / 3 work hours.
∙ For a monthly pay period, multiply the state hourly minimum wage by 173 1 / 3 work hours.
An employer is legally allowed to deduct money from a nonexempt employee’s paycheck for absences or for coming to work late. Such deductions may not exceed the proportionate wage that would have been earned during the time actually lost. However, for a loss of time less than 30 minutes, a half hour’s wage may be deducted.
It is important to keep in mind, however, that employers may make deductions from an exempt employee’s salary for work absences only under certain conditions. These conditions are in direct relationship to the reason for the employee’s absence and to any leave time that the employer chooses to provide, such as PTO, paid sick leave or paid vacation leave. This does not preclude employers from making deductions from an exempt employee’s available PTO in partial or full-day increments when the employee is absent for personal reasons or due to sickness; however, after all available PTO time has been exhausted, the employer cannot legally dock the pay of an exempt employee for absences that are for a period of less than a full week. Employers may make deductions from an exempt employee’s pay in full week increments only (provided the absence is not a result of a shutdown of the employer’s operations).