PAYROLL DEDUCTIONS

November 2002

What can you deduct from your employees’ wages?

Recently, IBA had a call from a member asking:

“Our employees can drive their company vehicles home at night, but cannot use them for personal use. Can I deduct our insurance deductible from their wages if they are involved in a collision in the company vehicle and it is their fault?”

Hmmmmmmmm? Interesting question.

IBA did some research. The following is business advice, NOT LEGAL ADVICE (contact a qualified attorney for legal advice surrounding this question) that you should carefully consider before making deductions from your employee’s wages. ONE BIG KEY TO REMEMBER – Except for taxes or other deductions specifically authorized by state law (i.e. child support) an employer cannot take any deductions from the earnings of an employee without:

1. The employee’s prior written approval, and

2. The deduction must be to the benefit of the employee.

Based on the existing laws (RCW 49.52.060 (law passed by the Legislature) and WAC 296-126-025 (administrative rule adopted by the Department of Labor and Industries), see text below) we do not believe it is acceptable business practice to deduct the vehicle insurance deductible from the pay of a worker who is involved in a vehicle accident in a company vehicle, and the accident was the fault of the worker, for the following reasons:

· RCW 49.52.060 does not allow an employer to make deductions from an employee’s pay for a purpose that is NOT to the benefit of the worker. The insurance deductible is clearly not to the benefit of the worker. See RCW 49.52.060 below:

RCW 49.52.060 (law passed by the Legislature) states: “The provisions of RCW 49.52.050 shall not make it unlawful for an employer to withhold or divert any portion of an employee's wages when required or empowered so to do by state or federal law or when a deduction has been expressly authorized in writing in advance by the employee for a lawful purpose accruing to the benefit of such employee nor shall the provisions of RCW 49.52.050 make it unlawful for an employer to withhold deductions for medical, surgical, or hospital care or service, pursuant to any rule or regulation: PROVIDED, That the employer derives no financial benefit from such deduction and the same is openly, clearly and in due course recorded in the employer's books. (emphasis added by IBA)

· WAC 296-126-025(1) does not allow an employer to make a deduction from an employees pay for any breakage or loss of equipment unless the employer can show the breakage or loss of equipment was due to a dishonest act or willful act of the employee. In the case of a vehicle accident, we believe an employer would have a difficult time proving that the cause of a vehicle accident was a willful act of the employee – meaning the employee intended to damage the vehicle. See WAC 296-126-025(1) below:

WAC 296-126-025   Deductions.  Except as otherwise provided by law, no employer shall make any deduction from the wage of an employee:

     (1) For any cash shortage, walkout (failure of customer to pay), breakage, or loss of equipment, unless it can be shown that the shortage, walkout, breakage or loss was caused by a dishonest or willful act of the employee. (emphasis added by IBA)