When Can I Deduct from my Employee’s Paycheck? Part 3: Deductions for Cash Register Shortages and Property Damage

Now that you know where and when you can (and cannot) deduct from your employee’s wages for uniforms and tools and equipment, we will turn to deductions for cash register shortages and property damage in this week’s installment of our Paycheck Deductions blog series.

Federal law allows employers to charge employees for items they break or for shortages in their cash register drawers provided the affected employee still earns at least the minimum wage. Many states, however are more protective. Some states require the employee to consent in writing before an employer can deduct the cost of broken goods or cash register shortages from the employee’s paycheck, and some allow these deductions only if the employee is responsible for the loss or shortage. In all cases where cash register shortages and property damage deductions are permitted by applicable law, employers should obtain specific, voluntary, written consent from an employee, indicating the amount and timing of such deduction. Below are some additional state-specific laws and regulations regarding deductions for cash register shortages and property damage.

In Alaska, cash or cash register shortages and lost, missing, or stolen property can only be deducted if an employee admitted willingly and in writing to having personally taken the specific amount of cash or property alleged to be lost, missing, or stolen. Alaska employers are further prohibited from making deductions for damage or breakage costs unless clearly due to willful conduct of the employee, and the employee has acknowledged responsibility in writing.

Employers in California cannot legally deduct from an employee’s wages if, by reason of mistake or accident a cash shortage, breakage, or loss of company property or equipment occurs. Unless the employer can show that the employee acted dishonestly, willfully, or in a grossly negligent manner, these costs may not be passed along to employees.

In Colorado, an employer may only make such a deduction when necessary to cover the replacement cost of a shortage due to theft by an employee if a report has been filed with the proper law enforcement agency in connection with such theft pending a final adjudication by a court of competent jurisdiction; however, if the accused employee is found not guilty in a court action, if charges are dismissed, or if criminal charges related to such theft are not filed against the accused employee within 90 days after the filing of the report with the proper law enforcement agency, the accused employee is entitled to recover any amount wrongfully withheld plus interest.

Connecticut employers may not deduct for cash shortages or damaged or lost property unless the employee has signed a form approved by the Connecticut Department of Labor.

An employer in Hawaii cannot deduct from an employee’s paycheck for the following items, even with written consent from the employee:

• cash shortages from a common money till, cash box or register used by two or more people;

• cash shortages from a money till, cash box, or register under control of a single employee if the employee is not given an opportunity to account for all money received at the start of a shift and all money turned in at the end of a shift;

•   cost for breakage;

• losses due to accepting a bad check if the employee is given discretion to accept or reject checks; or

• losses due to:

  • defective or faulty workmanship

  • lost or stolen property,

  • damage to property,

  • default of customer credit, or

  • nonpayment for goods or services received by customers if such losses are not attributable to the employee’s willful or intentional disregard of employer’s interests.

Iowa employers cannot deduct or withhold wages from an employee’s pay check for any of the following:

• a cash shortage in a common money till, cash box, or register operated by two or more employees or by an employee and an employer. However, an employer and a full-time manager may agree in writing signed by both parties that the manager will be responsible for a cash shortage that occurs within forty-five days prior to the most recent regular payday. Not more than one such agreement can be in effect at an establishment;

• any losses due to acceptance by an employee of dishonored checks if the employee has been given the discretion to accept or reject such checks and the employee does not abuse the discretion given;

• any losses due to breakage, damage to property, default of customer credit, or nonpayment for goods or services rendered so long as such losses are not attributable to the employee’s willful or intentional disregard of the employer’s interests;

• lost or stolen property, unless the property is equipment specifically assigned to an employee and the employee acknowledged receipt of the item in writing; or

• costs of personal protective equipment needed to protect an employee from employment-related hazards, unless provided otherwise in a collective bargaining agreement. This does not apply to items of clothing or footwear which may be used by an employee during nonworking hours.

Deductions made for cash and inventory shortages, breakage, returned checks or bad credit card sales, and losses resulting from burglaries, robberies, or alleged negligent acts of an employee in Kansas are not allowed.

Kentucky employers may not deduct for cash shortages in a common money till, cash box or register used by two or more persons, breakage, losses due to acceptance by an employee of checks which are subsequently dishonored if such employee is given discretion to accept or reject any check, or losses due to defective or faulty workmanship, lost or stolen property, damage to property, default of customer credit, or nonpayment for goods or services received by the customer if such losses are not attributable to employee’s willful or intentional disregard of employer’s interest.

Louisiana employers may not fine an employee or withhold or deduct fines from an employee’s wages, unless the employee willfully or negligently damages or breaks goods, works, or the employer’s property, or the employee is convicted or pleads guilty to theft of the employer’s funds.

In Maine, an employer may not withhold or deduct wages from an employee’s wages for cash or inventory shortages, dishonored checks or credit cards, damages to the employer’s property in any form, or any merchandise purchased by a customer.

Maryland employers may not deduct the following from an employee’s wages unless the employee has given separate and distinct written consent which addresses only the particular deduction to be made and nothing more:

• cash shortages,

• inventory shortages,

• dishonored checks,

• dishonored credit cards,

• damages to the employer’s property in any form or

• any merchandise purchased by a customer

Massachusetts employers can only deduct from an employee’s pay where the law allows it, such as wage withholding taxes, or where the employee asks for a deduction to be made for his or her own benefit such as to put money aside in the employee’s savings account. It is unlikely that deductions for cash or inventory shortages or damage to the employer’s property would fit into either category.

In Nevada, an employer may not make any other deductions from an employee’s wages, unless:

• The employer has a reasonable basis to believe the employee is responsible for the amount being deducted by the employer, including

  • cash shortages

  • breakage, damage, or loss of the employer’s property

  • required uniforms

  • required tools

  • other items necessary for employment;

• The deduction is for a specific purpose, pay period and amount; and

• The employee provides voluntary written authorization for the employee to deduct the amount from the wages.

North Carolina employers may withhold or deduct a portion of an employee’s wages for cash or inventory shortages, or loss or damage to property only after giving the employee written notice of the amount to be deducted seven days prior to date of the deduction. An employer does not have to give an employee who has been separated from employment the seven day notice. An employer is not required to have written consent for such deductions if the employee has been arrested or criminal process has commenced against the employee as a result of the shortage or property damage. If the employee is not found guilty, the employer must return the deducted amount to the employee.

In Oklahoma, an employer may not withhold or deduct any portion of an employee’s wages for breakage or loss of merchandise or inventory or cash shortages unless the employee has agreed to the deduction in writing, signed by both the employee and the employer, and the employee was the sole party responsible for the cash shortage or item damaged or lost.

South Carolina employers may not withhold or deduct for cash shortages or property damage unless the employer has given the employee at least seven days’ notice of the withholding or deduction.

An employer may make the following deductions only from an employee’s final paycheck, and they only may be applied to incidents in the final pay period and may not be saved up from previous pay periods to be deducted from final check. Such deductions may not reduce the employee’s final check below the applicable minimum wage, even if the business makes such an agreement with the worker. The business has the burden of proving that workers were informed of company policies regarding these deductions.

• Cash register shortage only if the business has established policies regarding cash acceptance, and if the worker has counted money in the register before and after shift and has sole access to the till during his/her shift.

• Breakage, loss or damage of equipment if it can be shown to have been caused by the worker’s dishonest or willful act.

• ·Acceptance of bad checks or credit cards if in violation of established check and credit card acceptance policies before the event.

• Worker theft only if the business can show that the worker’s act was dishonest or willful, and if the business filed a police report.

In Wisconsin, employers may not make any deduction from the wages of an employee for defective or faulty workmanship, lost or stolen property (presumably this would include a cash shortage), or damage to property, unless the employee authorizes the employer to do so in writing for each individual occurrence, the employer and a representative designated by the employee determine the defective or faulty workmanship, loss, theft or damage is due to the employee’s negligence, carelessness, or willful and intentional conduct, or the employee is found guilty or held liable in a court of competent jurisdiction by reason of that negligence, carelessness, or willful and intentional conduct.

Wyoming employers may withhold or deduct wages from an employee’s paycheck:

• for damages suffered by the employer due to the employee’s negligence, provided:

  • the employee’s negligence is determined by a judicial proceeding;

  • the amount of the damage suffered by the employer is determined by a judicial proceeding;

  • the negligence and damages arise in the course of the employment; and

  • the employer has not received payments, compensation, or any form of restitution from any insurer, assurer, surety or guaranty to cover any of the damages. Where the employer has received payments, compensation, or any form of restitution from any insurer, assurer, surety or guaranty to cover any of the damages caused by the employee’s negligence, the sum of the offset shall not exceed the amount of any applicable deductible or two hundred fifty dollars ($250.00) whichever is less.

• resulting from cash shortages, provided:

  • the employee gives written acknowledgment upon beginning employment that he or she shall be responsible for any such shortages;

  • the employer and employee verify in writing the amount of cash that is in the register or cash box at the beginning of the employee’s work period;

  • the employer and employee verify in writing the amount of cash that is in the register or cash box immediately at the end of the employee’s work period; and

  • the employee is the sole and absolute user and had sole access to the register or cash box from the time they checked in until the time they checked out.

  Arizona, Idaho, Illinois, Michigan, Minnesota, Nebraska, New Mexico, North Dakota, Ohio, Tennessee, Texas, Utah, Virginia, and West Virginia require voluntary, specific, written consent at the time a deduction is made for such costs. Employers in Delaware, Indiana, Montana, New Hampshire, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, and Vermont may not deduct for cash register shortages or property damage.

  This blog article is intended for general informational purposes only and should not be construed as legal advice or opinion. Contact myHRcounsel with questions concerning specific facts and circumstances.