Can an Employer Withhold Your Pay for Any Reason?

As a leading employment law firm in California, we at D.Law hear a lot of questions about unlawful workplace behavior. One particular question our lawyers get frequently is, “Can an employer withhold pay?” Below, we explain legal payroll deductions vs. labor law violations, such as wage theft. 

Understanding Legal Payroll Deductions That Impact Employees

California workers may not have a wage theft case if their paycheck withholds anything for certain purposes, including:

• Required tax withholdings: When businesses pay employees, their paychecks will feature deductions for state and federal taxes as well as Social Security contributions. 
• Authorized deductions: Some workers may agree to further deductions for health insurance coverage, retirement plan contributions, or union dues. These withholdings all require written authorization before going into effect. 
• Accounting errors: Perhaps payroll professionals incorrectly inflated your last paycheck with a higher rate of pay or additional hours worked. Your next regularly scheduled paycheck may withhold a set amount to recoup this mistake. 
• Court-mandated deductions: Wage garnishments mandated by a judge are not an unlawful deduction in a worker’s regular paychecks. 
• Damage to company property: If a worker is responsible for lost or damaged property, they may have to reimburse the company in the form of a paycheck deduction.  

So, can an employer withhold your pay? Legal action may not be warranted in circumstances like these. An employment lawyer can review the unique details of your case and determine whether there are grounds for a lawsuit. 

How State and Federal Laws Protect Employees

When it comes to altering an employee’s pay, employers must abide by state and federal labor laws. Legislation protects workers regarding compensation and aims to prevent instances of unpaid wages across various industries. 

On the federal level, the U.S. Department of Labor mandates that every employment agreement involve compensation. The department’s Wage and Hour Division enforces laws pertaining to both exempt and non-exempt employers. 

Notable regulations include:

• The right to receive back pay
• Not docking pay for performance issues
• Collecting final wages after termination

State laws also hold employers accountable to prevent wage theft. California law provisions list several circumstances that qualify as wage theft. These include an employer withholding earned tips or overtime pay, refusing paid sick leave, or not including accrued vacation pay in an employee’s paycheck if they utilize paid time off.

Five Types of Unlawful Paycheck Deductions

Can an employer withhold pay for any reason? Some workers are victims of unlawful deductions but may not realize their employer’s actions are illegal. Here are some notable violations of wage theft laws.

1. Deducting Pay in Retaliation

Workers have the legal right to raise certain concerns within the workplace. Whether they file a complaint with a regulatory body or report unethical behavior, employers cannot punish them for exercising their rights. Illegal forms of retaliation include wrongful termination and withholding pay. 

2. Reduced Pay Stemming From Workplace Discrimination

Employers can’t discriminate against their staff for their age, race, color, sex, and other characteristics. If someone routinely notices reduced pay wages without their authorization and suspects discrimination, an employment lawyer can review the details and recommend an appropriate legal strategy. 

3. Misclassifying Workers

Who can an employer withhold pay from? All employees and independent contractors can be subject to tax withholdings. However, workers may have grounds for a wage claim if their employer continually misclassifies them. 

For example, an independent contractor may not be eligible for overtime pay. By incorrectly classifying a non-exempt employee as a contractor, the business will illegally withhold any extra wages they earn. 

4. Missed Overtime Pay

Federal labor laws state that non-exempt employees are eligible to receive 1.5 times their normal pay rate in overtime. Non-exempt workers who exceed 40 hours a week and don’t earn this rate for additional hours are victims of wage theft. 

5. Withholding a Former Employee’s Wages

Whether an employee quits or has their position terminated, they have a right to compensation for hours worked in their last pay period. Final paycheck laws dictate that businesses must compensate exiting employees promptly. Failure to do so may lead to a legal or civil penalty. 

What Options Do Employees Have for Collecting Their Rightful Payment of Wages?

Every wage claim differs, so there’s no one-size-fits-all approach to collecting unlawfully withheld pay. Employees can explore the following options in an effort to resolve this issue:

• Reviewing their employment contract: Reading the details of one’s employment contract may uncover authorized reasons for withholding wages per company policy. 
• Speak with a payroll professional: Notifying a company’s payroll team about potential wage issues may alleviate the problem. 
• Consult an attorney: An employment lawyer can review pay stub deductions and determine whether a worker has a valid wage theft claim. 

At the suggestion of a lawyer, workers may file a complaint with labor boards or sue the employer. 

Possible Consequences for Businesses That Violate Employment Contract Terms

Can an employer withhold pay illegally and not face consequences? Circumstances vary for every case, but state and federal labor boards aim to hold businesses accountable and recover unpaid wages. In some cases, complaints to the Labor Commissioner’s Office could lead to an investigation and criminal sanctions. 

Employers who willfully withhold pay from their workers may face fines or other penalties. These actions could damage their reputation and prevent prospective employees from choosing to work there. 

Affected workers may also choose to file a civil suit with a qualified employment attorney. They could seek back pay for the withheld wages along with other damages, plus court costs and attorney fees. 

Consult an Attorney To Explore a Potential Unpaid Wage Claim

Not only can an employer withhold pay for income tax and certain court orders, but they can also make deductions for employee benefits like health insurance. However, suspicion of a cash shortage or use of meal breaks may qualify as an unlawful deduction. 

Track any pay stub discrepancies on pay dates and consult an employment attorney for legal help. Contact D.Law at (818) 275-5799 to request a free consultation.