“Shrinkage” and “breakage” are two words that businesses hear all the time. They refer to the money lost when items are stolen or broken. How is a business owner supposed to recoup those losses? Many times you cannot catch the thieves, and many businesses have shied away from the old “you break it, you buy it,” concept. Also, what do you do if an employee breaks an item? All of these questions float around business owners’ heads because there are no clear answers. Should employees be forced to pay for stolen or broken items? After all, it was an employee who broke the dish or who failed to see a teenager stuff something in his coat. Many business owners would say that it is only fair for the employee to be the one who pays. Although this may not seem wrong to you, it may be a violation of labor or state laws.
There are certain things that business owners are allowed to take out of employee pay, including taxes, retirement plan contributions, and health insurance premiums. Under federal law, this is all allowed because it benefits the employee, the business owner and, in some cases, the government itself. Although there is no federal law saying that an employer cannot dock employee pay for theft or damage, there is a law that could prevent you from doing so. This law is called minimum wage. If you were to dock an employee’s pay enough that the employee earned less than the minimum wage of your state, you could be sued by that employee, fined by the state, or even find yourself in legal trouble with the federal government.
States have the right to expand upon the federal government’s rules and create their own. Although there are some states that allow you to dock employee pay, some do not. Those that do also often require paperwork to be done in order to dock an employee’s pay. Why? The reason is employee safety. The state needs to ensure that employees are not being docked because they are disliked or because the business owner doesn’t want to pay what is owed. Make sure to read up on the laws of your state to find out if you are allowed to dock employee pay and how you need to go about it.
Employees and business owners have a serious and protected relationship. It is your job as a business owner to ensure that you aren’t breaking state or federal laws before handing out punishments to your employees.