As a general rule, employees covered by the Fair Labor Standards Act ("FLSA") must be paid a minimum wage, which is set by the FLSA itself. However, the amount of wages actually received by the employee in his or her paycheck may be less if the employer deducted any amounts from the employee's earnings.

The amount of wages that an employer must pay any particular employee can be lowered by:

  • Deductions or credits for some things provided by the employer, like room and board, as well as for "tips" made by certain workers
  • Wage garnishments
  • Wage or income assignments

Whether you're an employee or an employer, you need to how these various things work, as well as the limitations on when they can be used.

Deductions or Credits

Sometimes, an employee's wages include board, lodging or other "facilities" that are provided by his or her employer, or include "tips," or gratuities, the certain workers receive from customers during the workweek. So, an employer can sometimes take a credit (that is, reduce the amount of wages actually paid to an employee) for the costs board, lodging or other facilities, as well as tips.

As for board and lodging, an employer can deduct the costs of things like the costs of housing that is furnished as a dwelling or "home" for the employee, as well as meals furnished at hotels or restaurants. "Other facilities" includes things like:

  • Dormitory rooms, and tuition furnished by a college to a student-employees
  • General merchandise furnished at company stores and commissaries, such as food and clothing
  • Utilities, like gas and electric, provided for the employee's personal use

Goods that are primarily for the benefit or convenience of the employer, such as business-related travel expenses and necessary tools or uniforms used in the employee's work, are not considered "other facilities," and so the actual wages paid to an employee can't be reduced by the costs of such things.

In order to take a credit for the amount of "tips made by an employee:"

  • The employee must be a "tipped employee," that is, he or she regularly receives more than $30 a month in tips while doing his or job. Such jobs include waiters, waitresses and bellhops
  • The employer informed the employee that tips would be included as wages for the employee
  • The employee is allowed to keep the tips, that is, he or she is not required to turn them over to the employer

For purposes of the FLSA, a "tip" is a sum given by a customer as a gift or gratuity in recognition of some service performed for him. They must be paid in cash, or its equivalent. "Compulsory service charges," such as a 15% gratuity imposed on the customer's bill by the employer, are not tips.

Some other deductions commonly used by employers include:

  • The costs of furnishing or maintaining uniforms that are required by law or by the employer
  • The cost of tools or equipment furnished to employees

The employer can take a deduction for these items only to the extent that the deduction does not reduce the employee's pay below the minimum wage and/or overtime pay requirements.

Wage Garnishment

Wage garnishment is when an employer withholds a portion of an employee's wages for the payment of a debt that the employee owes to a third party. Garnishment can only take place under a court order. A creditor can't make an employer withhold wages.

So, under a valid order of garnishment, an employer can reduce the amount of wages that are actually paid to an employee. But, federal law limits the amount of wages that can be garnished in any single workweek or pay period.

Voluntary Wage Assignments

A "voluntary wage assignment" is when an employee asks his or her employer to withhold a portion of his or wages and to transfer or pay that money directly to a creditor to pay a debt, like child support. "Garnishment" is in fact a wage assignment, but it's involuntary and requires court action. Voluntary wage assignments are just that, voluntary, and don't require a court order.

So, obviously, an employer can deduct sums withheld under a voluntary wage assignment from an employee's wages. But, in addition, an employer can also make deductions for administrative or bookkeeping expenses that arise from making the payments to the creditor, but only to the extent that the employee's pay is not reduced below the minimum wage or overtime pay requirements.

Questions for Your Attorney

  • I made a voluntary wage assignment with my employer. How do I cancel it?
  • My employer requires that I live on its property. Can it include the cost of this housing as wages in my paycheck?
  • My employer just received a garnishment order from one of my creditors. How can I stop the garnishment?

Tagged as: Labor and Employment, Wage and Hour Law, wage garnishment, wage deductions