Docking Pay for Theft, Damage, and Loss of Company Property
When an employee loses or steals company equipment, may a New Jersey employer dock (“deduct”) the employee’s wages?
When there is a cash shortage in the register, may a New Jersey employer dock (“deduct”) the suspected employee’s wages?
The fast and quick answer is: “No.”
The New Jersey Wage and Hour Law (NJWHL) contain stringent rules that explain when an employer may deduct wages paid to employees. In fact, the NJWHL is much stricter than its federal counterpart:
34:11-4.4. Withholding from wages
No employer may withhold or divert any portion of an employee’s wages unless:
a. The employer is required or empowered to do so by New Jersey or United States law; or
b. The amounts withheld or diverted are for:
(1) Contributions authorized either in writing by employees, or under a collective bargaining agreement, to employee welfare, insurance, hospitalization, medical or surgical or both, pension, retirement, and profit-sharing plans, and to plans establishing individual retirement annuities on a group or individual basis . . . .
(2) Contributions authorized either in writing by employees, or under a collective bargaining agreement, for payment into company-operated thrift plans; or security option or security purchase plans to buy securities of the employing corporation, an affiliated corporation, or other corporations at market price or less . . . .
(3) Payments authorized by employees for payment into employee personal savings accounts, such as payments to a credit union, savings fund society, savings and loan or building and loan association; and payments to banks for Christmas, vacation, or other savings funds; provided all such deductions are approved by the employer.
(4) Payments for company products purchased in accordance with a periodic payment schedule contained in the original purchase agreement; payments for employer loans to employees, in accordance with a periodic payment schedule contained in the original loan agreement; payments for safety equipment; payments for the purchase of United States Government bonds; payments to correct payroll errors; and payments of costs and related fees for the replacement of employee identification . . . .
(5) Contributions authorized by employees for organized and generally recognized charities; provided the deductions for such contributions are approved by the employer.
(6) Payments authorized by employees or their collective bargaining agents for the rental of work clothing or uniforms or for the laundering or dry cleaning of work clothing or uniforms; provided the deductions for such payments are approved by the employer.
(7) Labor organization dues and initiation fees, and such other labor organization charges permitted by law.
(8) Contributions authorized in writing by employees, pursuant to a collective bargaining agreement, to a political committee, continuing political committee, or both . . . .
(9) Contributions authorized in writing by employees to any political committee or continuing political committee, other than a committee . . . .
(10) Payments authorized by employees for employer-sponsored programs for the purchase of insurance or annuities on a group or individual basis, if otherwise permitted by law.
(11) Such other contributions, deductions and payments as the Commissioner of Labor may authorize by regulation as proper and in conformity with the intent and purpose of this act, if such deductions are approved by the employer.
As you can see, there is no explicit right of an employer in New Jersey to dock (or “deduct”) wages for any other purposes provided above unless the Commissioner of Labor has authorized it. That means that when an employee damages, loses, or steals equipment, or when there is a cash shortage in the cash register, the employer cannot dock wages.
In light of these restrictions, the employer may pursue other avenues, including:
1. Disciplining the employee for damage or loss of company property. Discipline may include suspension without pay and termination.
2. Filing suit in small claims court to be awarded the full amount of the damage or loss of property. In the case of theft of company property, make a report to the police and press criminal charges.
3. Combination of options (1) and (2) above.
Docking pay for loss or destruction of company property may be a common practice (we see it on TV all the time!), but that does not mean that it is legal in New Jersey. If you are an employer who docked an employee’s pay for loss or damage to company equipment, don’t be surprised to hear an Investigator from the Department of Labor knocking on your door at some point in the future.
Employers who unlawfully deduct wages will be liable for unpaid wages, consequential damages, fines, and, where appropriate, attorney’s fees and costs.
The last thing employers want to do is to violate federal and state employment laws. It is critical that employers be intimately familiar with labor and employment law, or at least consult with an attorney to discuss these matters on a regular basis.