February 13, 2020 | Category: Compliance, Employment

Under what circumstances can an employer in Nevada make deductions from an employee’s paycheck? As with many questions involving the law, the answer is it depends.

payroll deductions in Nevada

Without authorization from the employee, employers may make deductions from an employee’s paycheck for (1) any amount required by law (i.e. taxes, child support, etc.) and (2) contributions to a benefit program (i.e. health insurance, pension plan, etc.).

These types of routine deductions are not usually an issue or the subject of a claim for wages. Deductions made for other reasons — damage to company property, educational expenses paid by the employer, unreturned uniforms or equipment, negative PTO balances, or other debts owed to the employer — are often where an employer runs into trouble.

Nevada law requires the following three conditions be met in order to make a payroll deduction for these “other” reasons:

  1. The employer has a reasonable basis to believe the employee is responsible for the amount to be deducted
  2. The deduction is for a specific purpose, pay period/date, and amount
  3. The employee voluntarily authorizes, in writing, the employer to deduct the amount from their wages

Additionally, Nevada law specifically prohibits the use of a blanket authorizations made in advance to withhold any amount from wages due to the employee. This is a common pitfall for employers as many employee handbooks include language regarding the employee being responsible for debts owed to the employer at the end of employment. Relying on that language in making the deduction is what gets employers into hot water.

How does this usually come up? Let’s look at a couple of examples to illustrate the difference between a proper and improper payroll deduction.

PROPER DEDUCTION

George took part in an educational program to advance within his field and within the company. The company paid for the cost of the educational program. George authorized the company to deduct a specific amount ($50) from each paycheck over the next 6 pay periods to reimburse the company for the educational program. The authorization was in writing, signed by the employee, and noted the amount and dates of each deduction to be made.

Why this is proper: The employer got the employee’s written authorization to make the deduction and the authorization was specific as to amount, pay date, and purpose.

IMPROPER DEDUCTION

Sally recently left the company, but failed to return a company-issued laptop. The company deducted the value of the laptop from Sally’s final paycheck based on language in their employee handbook that states that any amount owed to the company at termination of employment will be deducted from the employee’s final paycheck. Sally signed the handbook acknowledgement indicating she had read, understood, and agreed to comply with all policies in the handbook.

Why this is improper: The company is using a blanket authorization to make the deduction from the employee’s paycheck. This is prohibited under Nevada law. They need a written authorization from the employee that is specific as to amount, pay date, and purpose.

What are the options if an employer does not have a written authorization to make the deduction? In order to collect on a debt owed for damaged or unreturned equipment, loans made to employees, etc. when there isn’t a written authorization, an employer is left with one option — court. A claim can be filed with small claims or district court (depending on amount) to collect what is owed. Making the deduction without the written authorization or withholding the employee’s pay will result in penalties being assessed in the amount of up to 30 days of wages.

Federal law further complicates things. Under the Fair Labor Standards Act (FLSA), employers are not permitted to make deductions for things that are primarily for the benefit or convenience of the employer that would reduce the employee’s pay below minimum wage for each hour worked. Further, for exempt employees, federal law only allows full-day deductions to be made in seven very limited circumstances: when an employee is absent from work for one or more full days for personal reasons other than sickness or disability; for absences of one or more full days due to sickness or disability if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for salary lost due to illness; to offset amounts employees receive as jury or witness fees, or for temporary military duty pay; for penalties imposed in good faith for infractions of safety rules of major significance; for unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct rule infractions; in the employee’s initial or terminal week of employment if the employee does not work the full week; or for unpaid leave taken by the employee under the Family and Medical Leave Act (FMLA).

This issue can be very frustrating for employers. We understand and we’re here to help. Nevada Association of Employers has created a sample payroll deduction form available for download from our Member Portal along with many other resources. Our team of HR professionals is here to assist you in resolving these complicated situations. If you find yourself defending a claim, contact NAE about taking advantage of our legal services — available at a member-friendly below market rate.

Not a member and interested in membership? Contact us at membership@nevadaemployers.org to discuss the benefits of membership. Ready to join? You can complete a membership application online or call (775) 329-4241 and a member of staff can assist you.