In the past, many electronic devices issued to an employer’s workforce were often proprietary and served few functional purposes outside of its employees’ work. Today however, electronic devices utilized by the workforce often include the same kinds of tablets, smartphones, and computers consumers purchase for extensive personal use at any electronics store. These electronic devices often walk out the door with employees once their employment ends, leaving employers with high costs associated with replacement devices. In light of this problem, employers should consider developing a strategy to help ensure they retain electronic devices and can recover the cost of unreturned devices where permitted.
First, an employer should have clear policies establishing the employer’s ownership of the electronic devices and require that employees return devices at the time of termination of employment. An employer may also consider having employees sign an agreement in which they agree to pay the employer for the cost of an electronic device(s) if they fail to return the device(s). Generally, in order for an employer to deduct an amount owed from an employee’s wages, the employee must have authorized the employer in writing and have assigned the wages to the employer in an agreement, though the allowance of this practice may be stringently regulated by state or federal law. The goal is that these measures result in employees returning electronic devices when their employment ends. If not, employers must determine whether they can actually deduct the cost of an electronic device from an employee’s wages.
Deductions from exempt employees’ wages? No.
The Department of Labor takes the position that an employer may not make deductions from an exempt employee’s salary for damages caused by the employee. The Fair Labor Standards Act (FLSA) provides an exemption from minimum wage and overtime pay requirements for employees employed as bona fide executive, administrative, professional, and outside sales employees. To qualify for this exemption, employees must generally be paid on a salary basis at not less than $455 dollars per week, without regard to the number of hours worked. As such, an employer is likely prevented from recovering the cost of electronic devices by deducting from exempt employees’ wages. Otherwise, the employees’ exemption would be lost and the employer could face large sums of overtime wages and penalties.
Deductions from non-exempt employees’ wages? Sometimes.
Non-exempt employees are protected by the FLSA’s minimum wage and overtime provisions. The FLSA does not allow uniforms or other items that are considered to primarily benefit the employer, such as electronic devices, to be included as wages. Employers cannot take credit for these items in meeting obligations toward paying the minimum wage or overtime. As long as an employer does not make deductions that would reduce an employee’s pay below required minimum wage and overtime requirements, the FLSA allows an employer to make deductions for the cost of electronic devices.
Deductions under state law?
Since the FLSA permits deductions from non-exempt employee wages if minimum wage and required overtime are paid, the real question is whether state law permits the deductions. Many state laws permit deductions from wages as long as the employee has previously authorized the deduction, without regard to the type of deduction. Other state laws permit only deductions that comply with specific notice requirements and only for reasons listed in the state statute, which may or may not include the cost of electronic devices. A handful of state laws actually prohibit deductions from wages for the cost of electronic devices.
Employers can face a significant challenge in maximizing the percentage of employees’ electronic devices returned and keeping technology expenses down. Other potential solutions can include deductions from non-wage amounts paid to employees, pursuing claims against employees, and referring employees’ obligations to collection agencies. Effective policies and agreements can provide a significant incentive for employees to return electronic devices, along with other employer property, when their employment ends. In the event a device is not returned, deduction from an employee’s wages can be an effective method to recover some of the cost of the device. However, employers must understand federal and state laws addressing deductions and carefully evaluate where deductions are permissible. Having a strategy in place that addresses retaining and recovering electronic devices will keep employer IT departments happy and go a long way toward improving the bottom line.