Improper Wage Deductions
You employer tells you that you are going to be paid at a specified hourly rate, or a specified rate per week, but when you get your check the amount is less. Money has been deducted from your wages. Some of these deductions are legal, others are not.
- Tax Deductions. Your employer can make deductions for federal, state and local taxes. These amounts are withheld, and are to be passed on to the tax authorities. Deductions can also be made for your portion of “payroll taxes” – that is, your share of social security and Medicare payments. These also must be passed on to the government, and will be credited to your account with the government. The employer must also match payroll tax deductions, and pay its share to the government.
- 401(k). If your employer has a 401(k) plan, and you have elected to participate (you agree that a portion of your wages will be put in a retirement account maintained by your employer), then this money will go into this account. You have the right to direct how these payments are invested within the options provided by your employer’s 401(k) plan. These funds must be kept in a segregated fiduciary account for you, and you are entitled to review the funds in the account. You are entitled to roll over these funds to your own IRA when you leave your employer. It is a good idea to roll the funds over into an IRA, because they will continue to grow tax free, and you can withdraw them without penalty when you reach fifty-nine and one-half. If you withdraw the funds before that age, you will be subject to a 10% penalty. Of course, in either case you will have to pay taxes when you withdraw the funds, but they will not be subject to payroll taxes.
- Deductions for transportation. Some employers participate in a program where you can purchase a Metrocard with pre-tax money. You should participate in the program, because you can buy more rides with pre-tax money, as opposed to buying a Metrocard directly from the MTA.
If your employer is taking improper deductions, then there is a good chance that they are not paying you minimum wage or overtime.
- Deductions meals for lodging. Provided your employer complies with government regulations which set the amount that can be deducted, they can deduct amounts for meals and lodging. Note, that your employer cannot deduct charges for meals or lodging at any rate they choose. The Labor Law provides for specific amounts which cannot be exceeded.
- Breakage and customer walk-outs. Say you work at a restaurant. You break a glass, or a customer walks out without paying. Your employer cannot deduct from your wages the cost of the breakage or the money they lost from the walk-out. And they can’t punish you by deducting a “fine” for these charges from your wages.
- Lateness fines. Your employer cannot fine you if you arrive late to work, although they can deduct a prorated portion of your hourly pay for lateness. If you are an exempt employee (a manager, administrator or professional) and you get a weekly salary, then a regular practice of such fines will result in your being considered misclassified as an exempt employee, meaning that you may be entitled to overtime for your hours that exceed 40 per week.
- Deductions for over-payments. If your employer makes a math mistake and overpays you for the work done, they can deduct that amount from your future wages, but there are strict rules. If it is a really large mistake, the recovery must be stretched out so that it does exceed more than 12.5% of the over payment, and you must be paid at least the minimum wage during the period that the over-payment is being paid back. Your employer must also give you written notice of its plan to recover the over-payment from your future wage payments. If their calculation is not correct, you have the right to dispute the amounts that the employer wants to deduct.
- Deductions for loans. If you need some additional money, your employer may agree to advance you future wages, but if they deduct the advance from your wages, they cannot deduct interest payments or fees. The agreement about the advance and the deduction plan must be in writing.
Contact us online or call us at (212) 949-1001 if you think that your employer had made illegal deductions from your wages, and we will use our more than 25 years of experience to help you resolve the matter by negotiation or by going to court in the State of New York or New York City.