When employee keeps our property, can we deduct from the last paycheck?

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in Compensation and Benefits,Human Resources,Small Business Tax,Small Business Tax Deduction Strategies

Q. If an employee quits or is terminated and refuses to return employer property—such as a pager or a cell phone—can the employer deduct the value of the property from the employee’s final paycheck?

A. Not without the employee’s prior written permission to do so. Ohio law provides that: “No person shall . . . without an express contract with his employee, deduct or retain the wages of such employee, or part thereof, for wears, tools, or machinery destroyed or damaged.”

The law does not specifically address property of the employer that the employee has retained. Employers who want to make such payroll deductions should enter into a written agreement with the employee at the time they issue the property, permitting deduction of the value of the property from the final paycheck if the employee doesn’t return it.

Final note: Even with such an agreement, federal law prohibits deductions that would result in the employee receiving less than the federal minimum wage for each hour worked during the relevant pay period.

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