Referencing the North Carolina Wage and Hour Act (N.C.G.S. § 95-25.8), it does not outlaw this practice, but there are things to consider when withholding monies from your employees.
The Act actually gives an employer a fairly wide berth in terms of what it can deduct from an employee’s wages. Particularly relevant here are sections (a)(2) and (a)(3). Under section (a)(2), “when the amount or rate of the proposed deduction is known and agreed upon in advance, the employer must have written authorization from the employee which (i) is signed on or before the payday(s) for the pay period(s) from which the deduction is to be made; (ii) indicates the reason for the deduction; and (iii) states the actual dollar amount or percentage of wages which shall be deducted from one or more paychecks.” Section (a)(3) addresses the procedure when the amount or rate of the proposed deduction is not known ahead of time. In that scenario, the written authorization procedure of section (a)(2) must be utilized; however, prior to any deductions being made, the employee must receive (i) advance written notice of the actual amount to be deducted; (ii) written notice of their right to withdraw their written authorization; and (iii) a reasonable opportunity to withdraw the authorization in writing.
Since this would be considered a diversion of wages for the employer’s benefit, there are additional requirements imposed on employers, which can be found in subsection (b) of the Act. If the employee did not work any overtime hours, an employer may reduce to the minimum wage level, but the reduction cannot bring the employee below the minimum wage level. If the employee did work overtime hours, an employer may only reduce wages for non-overtime hours and only to the minimum wage level. An employer cannot reduce wages for any overtime hours.
Under this option a NC employer must obtain prior written authorization from the employee before making a deduction. Further, as best as possible, the authorization should detail what the deduction is for, and, when the amount is known ahead of time, what the amount of the deduction is. Where the deduction is not known at the time of authorization, the employee must later be advised of the deducted amount, notified of their right to withdraw authorization, and given a reasonable opportunity to do so.
For more information or additional legal guidance please contact Bennett Guthrie Latham, PLLC (336) 765-3121.
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