Richard G. Matson
Effective Jan. 1, 2006, the Washington State Department of Labor & Industries adopted new rules governing deductions from an employee’s regular or final paycheck. Special rules apply to adjustments for overpayments. These rules apply to most private employers in Washington. Special rules may apply to employees covered by a collective bargaining agreement. Some of the rules do not apply to public employers, while others may apply unless they are in conflict with other statutes or rules.
Deductions during ongoing employment
An employer may make the following deductions with or without the employee’s consent:
• Those required by state or federal law
• Deductions for non-occupational medical, surgical or hospital care
• Deductions to satisfy a court order, judgment, wage attachment, trustee process, bankruptcy proceeding or payroll deduction notice for child support payments
An employer may also make deductions where the employee expressly authorizes the deduction in writing in advance for the benefit of the employee. Examples include an employee’s purchase of the employer’s goods or services, a loan or cash advance made by the employer, employee benefits or payments to creditors.
Deductions from final wages
In most cases, when an employee ceases to work for an employer, the wages due must be paid by the end of the established pay period. An employer may make the same deductions out of an employee’s final wages that the employer is entitled to make during an ongoing employment relationship. Additionally, an employer may make deductions in the following situations, but only when the incidents described have occurred in the final pay period:
• For acceptance of a bad check or credit card, where the employee accepted it in violation of procedures
• For any cash shortage from a cash register, drawer or portable depository, if it can be shown that the employee had sole access to the cash and participated in an accounting at the beginning and end of the employee’s shift
• For any cash shortage, walk-out, breakage or loss of equipment where it was caused by a dishonest or willful act of the employee
• Deductions for employee theft are permissible only where it can be shown that the employee’s intent was to deprive and that the employer filed a police report
Adjustments for overpayments
An overpayment occurs when an employer pays more than the agreed-upon wage rate, or for more hours than actually worked. An employer can recover an overpayment from an employee’s paycheck, but only where the overpayment was “infrequent and inadvertent.” Infrequent means rarely, not occurring regularly, or not showing a pattern. Inadvertent means an error that was accidental, unintentional, or not deliberately done. The employer must provide advance written notice to the employee before any adjustment is made, and the notice must include the terms under which the overpayment will be recouped. The employer must detect and recoup the overpayment within 90 days.
Avoiding wage claims
These rules are quite specific and strictly limit the deductions permitted under state law. Violations can expose an employer to criminal and civil liability. Employees who prevail in wage claims are typically entitled to recover their attorney’s fees and costs, and may be entitled to double damages. Under some circumstances, officers, managers or other representatives of the employer who violate these provisions can be exposed personally. While these rules are restrictive and may prevent employers from making deductions they feel they are entitled to, where appropriate, employers do retain a right of private legal action to recover amounts due from an employee. An employer would be well advised to be guided by competent legal counsel before making any questionable deductions from an employee’s wages.
Richard G. Matson is the managing shareholder of the Vancouver office of Bullivant, Houser, Bailey, PC, a west coast regional, multi-practice law firm with six offices in four states. Matson’s practice emphasizes commercial litigation, employment defense and complex insurance defense. This article contains general statements of the law and should not be relied upon for any specific situation. Readers are advised to seek appropriate counsel for specific situations. Matson can be reached at 360-737-2304 or firstname.lastname@example.org.