Q. One of my employees who recently quit has failed to pay back a personal charge he made on our corporate credit card. Can I simply deduct the amount of the charge from his last paycheck or withhold his final paycheck until he pays for the charge?
A. You can’t unless the employee has given you written permission to make the deduction or withhold his paycheck. The Texas Payday Act sets forth specific requirements governing the deduction and withholding of wages, as well as the payment of wages upon discharge or resignation.
Under the law, employers must pay the full owed amount to terminated employees no later than the sixth day after the discharge. Workers who resign must be paid no later than the employer’s next regularly scheduled payday.
In addition, the Texas Payday Act expressly prohibits employers from withholding, deducting or diverting any part of an employee’s wages unless:
- A court orders the employer to do so (such as court-ordered child support payments)
- A state or federal law authorizes the employer to do so (such as IRS withholdings)
- The employee authorizes the employer, in writing, to deduct part of the wages for a lawful purpose.
Consequently, unless the employee has agreed in writing that your organization can deduct or withhold from his paycheck any unpaid personal charges on the corporate credit card, you must pay the employee his salary or wages in full, with no deductions, within the specified time.
All hope is not lost, however. Employers can still attempt to recover the amount owed as they would from any other creditor, by reminding the employee of the obligation and requesting payment and, if necessary, filing a lawsuit to recover the amount due.
Action to take now: Because of these limitations, employers should obtain specific written authorizations from employees to make for amounts owed to the employer.
For example, if an employee is provided a corporate credit card or a salary advance, the employer should obtain written authorization from the employee to deduct from his or her paycheck the amounts owed, either on a regular basis or in the event the employee fails to make the required payments. In addition, the written authorization should permit the employer to accelerate all amounts due upon termination, so that the employer can lawfully deduct the entire amount owed from the final paycheck.
However, even when a deduction is authorized, it should not reduce the employee’s wages below the lawful minimum wage. If this occurs, the employer may be in violation of federal minimum wage requirements.
- How to Fire an Employee the Legal Way: 6 Termination Guidelines
- Small Business Tax Deduction Strategies
- Track declining productivity to justify staffing, pay and promotion decisions
- Trust your fair policies: they'll prevail in court
- What makes someone ineligible for unemployment?
- Sometimes it's best to settle drawn-out cases