Q. While one of our employees was on workers’ compensation leave, she received disability payments. Due to a clerical error, we failed to take her off the payroll during that time, and she continued to receive her regular paychecks while on leave. The employee now refuses to sign an agreement to return the money on a payment schedule we were willing to set up. As a result, we would like to dock her pay for the overpayments. Are we allowed to do so?
A. No. You aren’t permitted to dock an employee’s pay for wage overpayments. Employers can’t require an employee to agree to a deduction of wages—any such deduction must be voluntary. The California Division of Labor Standards Enforcement (DLSE) has opined that that wage deductions must be voluntary and authorized in writing by the employee to be legal.
The DLSE has also specified that deductions from final paychecks (aside from those authorized by law) are never permitted, even if the employee provides written authorization. Finally, the DLSE stressed that pay deductions should not reduce the employee’s pay to below the minimum wage.
If an employee doesn’t voluntarily agree to repay a wage overpayment, the only recourse is to sue for the overpayment. Moreover, it would be unlawful to terminate an employee for refusing to agree to a deduction.
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