I cannot say this enough. Even if payroll deductions are authorized and/or allowed (for example, an employee agrees or a court order for child support), an employer cannot take so many deductions that an employee’s regular rate dips below minimum wage. Period. End of story. There are no exceptions to this that I am aware of (okay, well, at least for employees who are subject to minimum wage laws – there are a few specific exceptions not worth mentioning here – if you are in the industry, you know it). I wrote about this in an earlier post related to deductions for losses, theft or damage. An employee cannot agree to deductions that will take their regular rate below minim wage – even if they want you to take excessive deductions, you cannot do it.
Case in point – the DOL has recently announced that Life Time Fitness has agreed to pay 15,909 employees for back wages and liquidated damages in an amount of $976,765 (remember, employees get double damages). In Life Time’s situation, it appears that the DOL found violations at the Life Time Fitness locations in Fridley, Lakeville, Roseville, and corporate-wide. While the DOL vaguely reports it found “the employer violated federal minimum wage requirements at its health clubs and fitness center locations in 26 states”, it hints that the violations were related to taking deductions for the cost of uniforms (which is okay in Minnesota), but so much so that the employee’s earnings were dipped below the federal minimum wage (which is not okay). Now, I have been around long enough to know that there has got to be much more to this story than the DOL would like to announce, and the violations were probably not as black and white. But, it still serves as a good reminder for employers.
So what are you supposed to remember? Spread out deductions over several pay periods if necessary so the wages divided by hours worked results in at least minimum wage. However, on a larger scale, payroll personnel should be trained to verify that an employee’s regular rate does not dip below minimum wage, and/or utilize a software program to flag when the regular rate dips below a preset rate (and know when the applicable minimum wage increases!). Keep in mind that this is not only for uniform deductions – but all deductions – even court-ordered. And, as you can see, violations add up quicker than one could imagine (that is the deterrent, after all).