California law allows for deductions in 3 scenarios generally.
- Deductions required by federal or state law, such as income taxes or garnishments. These might include deductions for social security, medicare, unemployment insurance, California income taxes, federal income taxes, FICA (Federal Insurance Contribution Act).
- If an Employee authorizes the Employer in writing to make a deduction to cover health insurance premium.
- If an Employer sets up a retirement plan and the Employee elects in writing to have a deduction from their paycheck for a retirement plan.
Proper authorization for deductions, particularly for benefits like health insurance, requires careful documentation and understanding of employment law, a topic thoroughly addressed by a seasoned business attorney.
What is an improper deduction from a paycheck?
Sometimes an Employer will think that they can deduct amounts owed by an employee from a paycheck. However, this is generally not allowed under California law. For example, if an Employer lent money to an employee, that Employer cannot (without written consent from the Employee) withhold the loan amount from a paycheck.
Similarly, if an Employer feels an employee broke some property at work, such as accidentally breaking dishes at a restaurant, or accidentally damages some office equipment, the employer cannot self-help and take the amount out of the paycheck of the employee.
Other improper payroll deductions per the California Department of Industrial Relations include:
Tips/Gratuities: Employers cannot take tips left for an employee or deduct it from the paycheck.
Different rules apply for a tip pool.
Photographs: Employers cannot require that employees pay for a photograph of an applicant or employee that is used for work. The photograph must be paid for by the Employer (California Labor Code Section 401).
Bond: Employers must pay any bond required for a job, not deduct that from an employee paycheck.
Uniforms: Employers must pay for required uniforms and not deduct from an employee paycheck.
Business Expenses: Employers must reimburse employees for all expenses or losses incurred in the discharge of their duties. Examples of this would be business lunches that are required, mileage, parking fees, and conference dues. Understanding compliance extends beyond paycheck deductions to other aspects of employee welfare, such as mandated breaks, detailed in our guide on meal periods.
Medical or Physical Exams: If an Employer requires a medical exam or physical for employment, then the employer must pay the full cost of that and not deduct it from the Employer.
