Employee Deduction Regulations in California

Instructor: Millicent Kelly

Millicent has been teaching at the university level since 2004. She holds a Bachelor's degree in Criminal Justice and a Master's degree in Human Resources.

This lesson will provide the reader with information on lawful and unlawful employee deductions in the State of California. The three legal employer deductions, and instances where special circumstances apply will be discussed, and examples of common illegal deductions will be outlined.

Imagine the following scenario:

Tina has been working as a teller for California Trust Bank for more than three years. Recently Tina's employer required all employees to have professional pictures taken for a new website. Tina just received her paycheck as scheduled and noticed there was an employer wage deduction entitled photography in the amount of 100 dollars. She confronts her supervisor and is informed the deduction was taken to offset the employer's cost of using a professional photographer. Tina can't believe that her employer did this and wants to file a complaint. Was or wasn't this employee deduction lawful?

Keep reading and we will find out!

Employer Deductions in the State of California

There are two types of employer payroll deductions in the State of California: lawful and unlawful ones. For employers and employees, it is important to understand the differences between both. There are three legal employer deductions which employees can lawfully make, and a number of common illegal ones. Let's first look a the three legal employer deductions and some special exception circumstances where deductions can be legally justified.

Legal Employer Deductions in California

California labor law specifies the following three instances in which an employer can legally withhold wages from an employee:

  1. Under requirement of state or federal law
  2. When an employee has requested deductions in writing to cover premiums for benefit plans
  3. When a collective bargaining agreement authorizes deductions for insurance, pension, or welfare premiums

Although the last two instances that authorize employers to make wage deductions are self-explanatory, let's take a closer look at what might constitute a lawful deduction under state and federal law.

In instances where a state or federal court orders a wage garnishment, such as in the case of unpaid child support or taxes for example, deductions are lawful until the obligation has been satisfied. It is important to note, however, that the labor code specifically states that no employee can be terminated simply because a wage garnishment order has been threatened or ordered.

A Note About the IWC

The Industrial Welfare Commission or IWC regulates instances of legal employer deductions in the case of employer cash shortages, or equipment damage or loss. These types of deductions are limited to decisions issued by the court. It is illegal to implement an employee deductions if due to accidental negligence an employee breaks a piece of equipment for example. However, it can be lawful if a willful or dishonest act on the part of the employee causes equipment damage or failure and/or this act results in the loss of revenue.

A Note About Employer to Employee Loans or Advances

Employers are occasionally approached by employees about pay advances or loans. If an employer agrees to extend a loan or advance to their employee, the employee will usually be required to provide written authorization to lawful payroll deductions until the advance or loan is satisfied. However, should an employee resign or be terminated from their position, California labor law prohibits the employer from deducting the remaining amount owed from the employee's last paycheck. The only thing an employer may legally deduct in such instances is the one installment.

Common Illegal Employer Deductions in California

There are several unlawful deductions that employers make in the State of California. The list below summarizes some of the most common ones:

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