Deductions from Last Paycheck

Response #1: Many state laws prohibit the type of anticipatory set offs that you are trying to accomplish. Many of them require an employee to agree in writing at the time of the set off to the exact amount of the set-off. I would be especially cautious about ascribing a high "value" to the equipment. Much technology equipment depreciates in value very quickly. Many state laws have stiff penalties (treble damages, civil and criminal penalties) for violation of the wage payment laws. I recommend proceeding with caution.¹

Response #2: Reduction in wages based on owing a debt to the company or owing the company for equipment is absolutely prohibited in New York, New Jersey, Pennsylvania, and California. Most states do not let you have an advance authorization for a wage deduction such as this one. It is more recommended to have the employee execute an agreement at the time of termination.

 

But, in many places, you can offset against things like unpaid Personal Time Off ("PTO") or discretionary bonuses, so you may have a few options.²

 

Response #3: Another point to consider is that, in California, the State requires to hand deliver a paycheck on the employee's last day - including unpaid PTO, bonuses, expense reimbursements and any other amounts owed to the employee. It would be a challenge to have this calculated, then when the equipment is not returned, value the equipment and handwrite the check.³

 

Response #4: Your company should not take self-help remedies of paycheck deduction to recover loss of unreturned items. The employee's written acknowledgement may not make it permissible.

 

California Labor Code Section 224 allows deductions when authorized by the employee in writing, but that authorization is limited to (1) insurance premiums, (2) hospital or medical dues, or (3) other deductions not amounting to a rebate or deduction from the wage paid to the employee.⁴

 

Response #5: We have had a couple of situations where the employee refused/failed to return computer equipment after demand letters and calls, so filed a police report. The police officer went to the home and the equipment was handed over.⁵

 

Response #6: You can certainly provide the former employee with an invoice of the actual cost of the unreturned equipment. Whether the employee subsequently pays or returns the equipment will depend on the person. You can then decide whether it is worth your effort to track them down.

 

Another concern is whether the laptop or other device contains company confidential information. Consider if your IT department has any way of remotely wiping or disabling the loaned devices.

 

The letter requesting the return of the equipment should include a reminder of the former employee's confidentiality

obligations.⁶

 

Response #7: Actually, while California law is stricter, even federal law (the Fair Labor Standards Act) does not allow deductions from non-exempt pay if it reduces the hourly rate below minimum wage or if overtime payments are affected. For exempt employees, any deductions other than the 8 listed in the regulations will defeat the exemption (potentially for an entire job group), and this is not one of the listed ones.⁷

 

Response #8: We are an Ohio employer and we have a limited number of agreements, similar to what you describe, that we use in certain circumstances. We first withhold from unused PTO and then, if necessary, from wages, both of which are referenced in the agreement the employee signs. We do not make deductions from the final paycheck that would drop the amount of the check below minimum wage for the underlying hours worked, although I am aware of Ohio employers who will withhold the entire check. I agree that valuation can be tricky, and I have seen managers who want to set an unrealistic amount as a "penalty"/deterrence measure of sorts. I also agree there can be timing issues.

 

In many instances, by the time someone realizes equipment has not been returned and that the employee has signed a withholding agreement, the final paycheck is long gone.⁸

 

Response #9: In California, failure to pay the final paycheck in full can result in substantial penalties. If I recall correctly, the person can remain entitled to full pay for up to a month.⁹

 

Response #10: You are correct that it is fraught with pitfalls for the reasons already suggested by the group. One approach that I have found to be successful in the past is to enter into an agreement with the employee at the time of equipment issuance whereby they acknowledge the value of the equipment and that the company has the right to sue them and collect related attorneys fees in the event they fail to return the equipment.¹⁰