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The Mouse is not pleased! What’s your policy on uniforms?

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in Office Management,Payroll Management

Mickey and Minnie have gotten their due. The Department of Labor has announced that it has reached an agreement with the Walt Disney Co. to pay $3.8 million in back wages to 16,339 “cast members” who had to pay for “costumes” to be worn at the company’s theme parks.

We’re not talking about giant Mickey, Minnie and Goofy get-ups here, merely the everyday uniforms employees are required to wear.

Misstep in the Magic Kingdom: Disney deducted the cost of uniforms from employees’ pay, which caused some employees’ net pay to fall below the minimum wage, in violation of the Fair Labor Standards Act.

What the FLSA says about uniforms. The FLSA doesn’t define “uniform.” However, according to the DOL’s Field Operations Handbook—the investigator’s manual—ordinary, basic street clothing that employees choose to wear isn’t considered a uniform. This follows the IRS’ definition of a uniform. Flip side: Employees who must wear a specific type and style of clothing (e.g., employees who wear tuxedos or skirts and blouses or jackets of a specific or distinctive style, color or quality), are wearing uniforms.

The financial burden is on you, the employer, since uniforms are bona fide business expenses. You can charge employees for the cost of their uniforms, but you can’t reduce their wages to below the minimum wage. Upshot: Employees who earn only the minimum wage can’t be charged at all. You also can’t cut into employees’ overtime pay. Break: You don’t have to reimburse employees for the cost of additional uniforms, if you supply them with a sufficient number of uniforms.

The $3.35-per-week-solution. Employees who pay to maintain their own uniforms must be reimbursed if the maintenance costs reduce their wages to below the minimum wage. Key: You should require them to submit substantiation of their expenses (this will help with your tax records, too). Break: For enforcement purposes, the DOL says that it’s acceptable if you pay employees $3.35 per week (67¢ cents per day) as maintenance costs. No withholding: Since these are business expenses that you’re reimbursing under the accountable plan rules, you don’t have to withhold taxes.

No-payment options. You don’t have to worry about reimbursing employees’ maintenance costs if the uniforms are made of wash-and-wear materials, may be routinely washed and dried with other personal garments and don’t require ironing or any other special treatment such as dry-cleaning, daily washing or commercial laundering. Similarly, you don’t have to reimburse employees if you offer to pay the maintenance costs yourself.

A step-by-step payroll compliance guide to each pay period, month and calendar quarter of the year is now available. Download it free here.

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