According to California laws, wages earned via work are considered the employee’s full property. This means that, even when following legal procedures, employers may only make deductions from employees’ wages under certain specific circumstances, which include the following:
- All deductions required or sanctioned by state or federal law.
- Deductions expressly authorized in writing by the employee in order to cover insurance, medical expenses or other job-related expenses.
- All deductions previously agreed by collective wage contracts meant to cover health and welfare or pension plan contributions.
- All other deductions that do not reduce the total payment to an amount below from the agreed upon or minimum wage payment.
Though the labor code allows a limited amount of pay deductions without an employee’s agreement for reasons related to tax or pension withholdings, garnishments, or court orders, employers must make sure they are complying with both federal and state laws when making these deductions.
Employers must also take into consideration that, under California law, it is illegal to make deductions from employees’ wages as “punishment” for any losses the employer may think were caused due to an employee’s ordinary negligence. This includes situations where an employee’s alleged carelessness leads to workplace equipment being damaged or if installations were somehow compromised by the employee’s presence. Under state laws, an employer may enact disciplinary action for employee negligence but must always cover the cost of damage to its property out of their own resources.
Improper and unjustified wage deductions can serve as grounds for claims for either underpayment or wage theft, which requires any missing wages to be paid back to the affected employee, but can also result in other severe penalties for the employer.
The delicate nature of proper wage payment is the main reason why both employers and employees in California need to always ensure that they are properly documenting all information related to their payments, including all declarations of any possible deductions, along with proof that these comply with the California Labor Code, the Industrial Welfare Commission’s Wage Orders and case law.