Deducting From or Withholding Final Paycheck for Failure to Return Equipment

This Wisdom of the Crowd, compiled from questions and responses posted on the Employment & Labor Law Forum,* addresses how to handle the situation when an employee fails to return the company's equipment.

*(Permission was received from the ACC members quoted below prior to publishing their eGroup Comments in this Wisdom of the Crowd resource.)

Question:

I quickly surveyed some state law and it seems like most would prohibit deductions from or withholding final paychecks for failure to return equipment, but someone recently posted a remote worker agreement that stated that the cost of equipment could be deducted from a paycheck ("Employee consents to the withholding of his or her wages or benefits until all such materials are returned in working order."). What do most companies do here? Is that language meant to be a deterrent?

Practically, I am not sure how we would do this anyway given the timing on final paychecks in some places, like CA. In other places, like IL, I think final pay needs to be on the next payroll, if that is only a few days from the termination date. Again, I am not sure how to do this practically (since the employee needs time to actually send the equipment back to us).

Wisdom of the Crowd:

Response #1: I think that you are playing with fire with such provisions, especially if you have employees in states where the law frowns upon deductions from an employee's pay. Many states' wage payment laws provide that no deductions can be made unless the employee agrees in writing to the deduction at the time that it occurs. That is, in many states, "advance" agreements permitting deductions from pay are unlawful. And, under many states' wage payment laws there are very stiff penalties for violation of wage payment laws, including sometimes treble damages and attorney's fees. This may fall into the category of penny wise and pound foolish.¹

Response #2:

As you have already stated, this is a state by state issue. In Texas, you cannot garnish wages (except for Child Support payments based on a court order) without a written agreement with the employee.²

Response #3: I agree with others' comments. Pretty much every employer gets burned on this from time to time. In California, we try to use a variety of tracking procedures for technology issued to employees. For example, all tech is numbered with labeling that is very difficult to remove, and is assigned to an individual who must sign that he/she received the equipment with the specific code. If equipment is swapped out, signatures for returning old and accepting new equipment are required. Upon being informed that an employee is leaving, a departure interview is set up and the individual is reminded by HR and IT that he/she has signed out certain listed equipment and must return specific equipment. During an exit interview, he/she must turn in the equipment. With a high-level of tracking, it is harder for someone to claim that they already turned it in and the company lost it.

For those who try to keep technology, the best you can do is to file a small claims complaint.³

Response #4: Has anyone tried to go after these folks criminally after a demand was made for the return of the property? I do not know that it is worth the effort or that law enforcement would take enough of an interest, but I am curious as to whether someone has tried it.⁴

Response #5:

Yes, we have. In some jurisdictions, law enforcement is not interested, but in others they have been helpful.⁵

Response #6:

In response to the question about criminal referrals for departing employees who fail to return equipment, I can share our experience. Several years ago we contacted local police after our unsuccessful efforts to obtain the return of a laptop containing sensitive information. The local police had a special unit dealing with this sort of thing and took the matter. Ultimately the former employee was stopped for a traffic violation in another state, and the electronic check turned up the VA arrest warrant. The former employee was extradited to VA to stand trial for the offense.⁶

 

¹Marjory Robertson, AVP & Senior Counsel, Sun Life Financial (Employment and Labor Law, Aug 25, 2015). ²Maryrose Delahunty, Vice President & General Counsel (Employment and Labor Law, Aug 25, 2015). ³Reprint anonymously (Employment and Labor Law, Aug 25, 2015). ⁴Reprint anonymously (Employment and Labor Law, Aug 26, 2015). ⁵Jeffrey Spector, Assistant General Counsel, Sodexo, Inc. (Employment and Labor Law, Aug 27, 2015). ⁶Gregory Watchman, Managing Associate General Counsel, Freddie Mac (Employment and Labor Law, Aug 27, 2015).