This is Part 3 in a 6-part series on Connecticut Employment Laws You Didn’t Know Existed.
Any time you are having employees pay you – whether through a payroll deduction or by having the employee pay you directly – you are walking into a legal minefield. Deductions are typically allowed only when there is some benefit being provided to the employee in exchange. Costs of loss, breakage, and customer theft are treated by the Connecticut Department of Labor as part of the “cost of doing business,” and are almost never recoverable from an employee. While many employers are familiar with these parameters, many do not realize that most deductions must be authorized in writing by the employee on a form approved by the Commissioner of Labor. Even more surprising is that the sample form provided on the Connecticut Department of Labor’s website may not be used without approval from the Commissioner of Labor!
So how do employers take deductions lawfully? First, make sure the deduction is for a permissible purpose – no deductions for loss, breakage, or customer theft! Some examples of permissible purposes are deductions required or authorized by state or federal law (such as taxes or garnishments) and deductions for contributions into automatic enrollment retirement plans. These may be deducted without having an authorization form approved by the Commissioner of Labor. Deductions may also be made if they are authorized by the employee, in writing, for medical, surgical or hospital care or service, without financial benefit to the employer and recorded in the employer’s wage record book. This written authorization does not need to be approved by the Commissioner of Labor. Any other deduction must be made pursuant to written authorization on a form approved by the Commissioner of Labor.
If you wish to make deductions requiring approval from the Commissioner of Labor, follow these steps:
- Draft a form that clearly explains the purpose of the deductions to be made and leaves room to fill in the dollar amounts to be deducted. For items of benefit to the employer, such as uniforms or other equipment, you must ensure that the deduction does not result in the employee receiving less than minimum wage. Spreading the payments out over time can help avoid this problem. Be specific as to the nature of the deduction. Do not include lines like “Other,” as these forms will not be approved! You can use the sample form available on the Connecticut Department of Labor’s website to help you draft your own form. Different sample forms are available for uniform rental/laundry service and for repayment of advances of vacation time or paid time off. Remember, even if you do not make any changes, you must still obtain approval to use these forms!
- Include language explaining to the employee how to discontinue the payroll deduction if desired. Make clear that the employee may still be required to repay any amount owed if the deduction is stopped. This is particularly important if you offer services to employees that will be repaid over time. For example, a veterinary office might allow employees to purchase care for their own pets, perhaps at a discount. If the employee stops the payroll deduction used to repay this bill, the employee can still be billed as would a regular customer, but the form should specify this to ensure there is no confusion.
- Submit the form to the Connecticut Department of Labor for review. Begin deductions only after receiving approval.
- Make sure the forms are kept up to date with new forms completed whenever an employee’s deductions will change. Also, if you need to change the form to add new kinds of deductions for any other reason, you will need to have the form approved again. With this in mind, be sure to draft your form with enough flexibility for future changes, while being specific enough to obtain approval.
Like several of the other laws discussed in this series of Connecticut Employment Laws You Didn’t Know Existed, compliance is not difficult if you know the law exists. Our team of labor and employment law attorneys can educate you about the laws affecting your company and help ensure you are in compliance.