As many of you know, the issue of when an employer can make deductions from an employee’s wages comes up with regularity.  The legality of doing so is complicated and depends, to some extent, on whether the employee is exempt (salaried) or non-exempt (hourly).  The Department of Labor (DOL) recently issued an opinion letter that addresses whether an employer may deduct from the salaries of exempt employees or require them to reimburse the company for damage to or loss of company equipment without jeopardizing the employees’ exempt status under the Fair Labor Standards Act.  The highlights from the opinion letter are summarized below:

1. To be considered an exempt employee, the employee must be paid a predetermined amount not subject to reduction because of variations in the quality or quantity of the work performed.
2. Subject to certain explicit and limited exceptions, an exempt employee must be paid his/her full salary for any week in which the employee performs any work.
3. The DOL has ruled that none of the specified exceptions contemplates charging employees a fine for loss, damage or destruction of company equipment, property or funds.
4. With respect to non-exempt employees, the Opinion Letter provides that deductions for loss or damage to company property or equipment can be made from the employees’ wages, provided the deduction does not reduce the employees’ pay below the applicable minimum wage (which varies state by state).

Therefore, to the extent it is your company’s policy or practice to require deductions from the salaries of exempt employees to pay for the cost of lost or damaged tools or equipment, you should immediately revise your policy and/or discontinue the practice.  Please note, the opinion letter does not address whether deductions can be made for recovery of employee theft or payroll advances/loans.  Such deductions would be permissible.

As outlined below, two AZ employers had the dubious distinction of being featured in the Arizona Republic because they were on the losing end of an employment dispute. In the first case, the Princess Resort paid a former concierge supervisor $13,750 for emotional distress and $10,000 in back wages to settle a religious discrimination lawsuit brought on her behalf by the EEOC.  The Princess had given the claimant Sundays off to attend church for a period of time.  A new supervisor put an end to that practice.  The claimant, a long-term well regarded employee, was fired for alleged performance issues 12 days after complaining to HR about the new supervisor’s refusal to give her Sundays off.

In the second case, a jury awarded 9 Hispanic men $2.4 million for enduring years of racism while they worked for the City of Tempe.  The discrimination consisted of keeping the claimants in low-level posts, racial epithets, and other harassing type behavior. The settlement/verdict amounts noted above, do not include attorney fees, which can easily reach the six figure range. My point in sending this news update is to keep you all on your toes.  When it comes to employment issues you must be ever vigilant to avoid being featured in the newspaper.