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Paycheck problems: Know limits on deductions, promptness of pay

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in Compensation and Benefits,FMLA Guidelines,Human Resources

Two mistakes with Trina Richardson's final paycheck cost her employer, an Oregon credit union, more than the check itself. Here's where the company went wrong:

Improper deduction. The credit union deducted $68.83 from her final check for office supplies that her manager believed she had taken. When Richardson sued, that move cost the employer $200 (plus attorney fees) for violating the state law on improper deductions without an employee's consent. The company was penalized even though Richardson's check was more than she was due because she received double the amount typically paid for unused flextime.

Delay in payment. The credit union also had to pay a $1,289 penalty to Richardson because it didn't follow state law on how quickly employers must give workers their final paychecks. Oregon law says that if workers give at least 48 hours' notice, all wages are due immediately upon their departure. But the company took two weeks to issue the check. A federal appeals court said Richardson was due eight hours of wages for every day the check was late. That's every calendar day, not just workdays. (Richardson v. Sunset Science Park Credit Union, No. 00-35342, 9th Cir., 2001)

Advice: Don't wait until an employee leaves before getting acquainted with your state law on how quickly you must cough up her final check.

Also, don't make deductions unless you're positive they're legal under both federal and state law. The federal Fair Labor Standards Act says that if a deduction is for the company's benefit, such as payment for uniforms, tools or damage reimbursement, you can't deduct any amount that would reduce an employee's pay below the minimum wage. One legal option: You can spread out the cost of uniforms and other charges over several pay periods.

Some deductions, however, are allowed even if they push the worker's earnings below the minimum wage. These include deductions for taxes, union dues under a collective bargaining agreement, reasonable board and lodging, voluntary insurance premiums, savings plans and court-ordered wage garnishments.

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