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Damage Deductions and Exempt Employees

Date: 07/07/2006 | Category: Business | Author: Diana Heeb Bivona

The U.S. Department of Labor recently wrote an opinion letter addressing the issue of whether or not an employer could impose a fine on exempt employees who damage or lose equipment used in performing their jobs, such as laptop computers, blackberrys, or cellular telephones?

Their answer?  An employer can legally require deductions from the wages of its nonexempt employees for the cost of lost or damaged equipment, as long as the deductions do not reduce the employees’ pay below the minimum wage.

However, such deductions for exempt employees would violate the Fair Labor Standards Act regulation prohibiting salary reductions due to the quality of work performance. Because the employees would not be paid a guaranteed or fixed amount, violation of the salary basis rule would also jeopardize their exempt status.

In short, employers should tread with caution when deducting damages from the salaries of overtime-exempt employees unless expressly authorized by FLSA, its regulations or applicable state law.

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