Employment Law Updates

FINAL PAYCHECKS – A COSTLY TRAP FOR THE UNWARY

Oregon law requires employers to abide by very strict deadlines when it comes to issuing final paychecks. 

 

If an employee is terminated or the employment ends by mutual agreement, the final paycheck deadline is the end of the next business day.  If the employee resigned with at least 48 hours’ notice, the deadline is the end of the last day of work.  If an employee quits with less than 48 hours’ notice, excluding weekends and holidays, the paycheck is due within five days, excluding weekends and holidays, or on the next regular payday, whichever comes first.

 

Failing to abide by those deadlines can be costly: damages for late paychecks can include 30 days’ pay in addition to the unpaid amount, plus the employee’s attorney fees.  Consequently, employers should always consult with an attorney knowledgeable about employment law when there are questions regarding final paychecks.

FREQUENTLY ASKED QUESTIONS ABOUT DEDUCTIONS FROM WAGES

Under Oregon law, an employer’s ability to deduct amounts from wages is severely restricted.  Below are some answers to frequently asked questions that should give you a general sense of what can be legally deducted from an employee’s wages.

Q: Can I deduct from my employees’ wages their contributions to charitable organizations?

A: Yes, under Oregon law such deductions are lawful so long as the following requirements are met: (1) the employee has voluntarily signed an authorization; (2) the deductions are recorded in the employer’s books; and (3) the employer is not the ultimate recipient of the money.  Another example would be loan payments that go to a financial institution other than the employer. 

Q: My employees earn the minimum wage.  To help them out, our company purchases the tools and uniforms they need to perform their job.  Can we require the employee to pay back those amounts?

A: No.  Under Oregon law, employees may not be required to pay for any necessary items to be used in performing their job if it would reduce their pay below the minimum wage in any pay period.  Moreover, even if a “necessary item” deduction does not drop the employee below the minimum wage, the employer still cannot deduct the cost from the employee’s wages; rather, the employer may only recoup the cost by means other than deductions from wages.

Q: Our employees are responsible for a portion of the premiums associated with our company’s health care plan.  Can I deduct an employee’s portion from his wages?

A: Yes, if the deductions are authorized in writing by the employee, are for the employee’s benefit, and are recorded in the employer’s books.  Similar examples include deductions associated with an employee retirement plan and goods or services purchased from the employer for the employee’s benefit.

Q: One of my employees damaged a company vehicle.  Can I deduct the cost of the damage from his wages?

            A: No.  Employers cannot make deductions for the cost of breakage or loss. 

Q: My company loaned an employee money.  He still owes us money on the loan but is leaving the company for another job.  Can we deduct the outstanding amount from his final paycheck?

A: Yes, but with certain qualifications.  Deductions from the final paycheck may be made only if: (1) the employee received the loan funds in cash or by check; (2) the loan was for the employee’s sole benefit and was not used in connection with the employee’s job; (3) there is a written agreement between the employer and employee allowing the deduction and the employee voluntarily signed that agreement; (4) the deduction is recorded in the employer’s books; and (5) the amount to be deducted from the final paycheck doesn’t exceed the amount which may be lawfully garnished (generally meaning the deduction cannot exceed 25% of an employee’s net earnings). 

Note that an itemized statement showing the amount and purpose of each deduction must be furnished to employees at the time wages are paid.

 

The penalty for violating Oregon deduction laws is the greater of (a) the actual damages resulting from the violation or (b) $200.  Because a series of seemingly harmless but unlawful deductions can quickly balloon to a sizeable penalty, employers should always consult with an attorney knowledgeable about employment law when there are questions regarding permissible payroll deductions.

HAVE YOU AUDITED WHETHER YOUR EXEMPT EMPLOYEES ARE REALLY EXEMPT?

Both state and federal law require that most employees be paid at least the applicable minimum wage, as well as overtime pay at time and one-half the regular rate of pay for all hours worked over 40 hours in a workweek.  The only time an employee is legally exempt from overtime pay is when the employee fits within a specific exception defined by law.  The most common exemptions from the overtime laws are for “white collar” employees; executives, administrative managers, professionals, certain computer employees, and outside sales personnel. 

Careful consideration should be given to each employee before he or she is granted exempt status.  The risk of misclassifying an employee as exempt can easily and quickly become very expensive.  If the misclassified employee successfully challenges the classification or your organization is audited by a federal or state agency, you will be liable for all overtime wages that should have been paid over the previous two years, together with interest, possible penalties, and attorney fees. 

For additional information on classifying exempt employees, please contact us. You can also get more information on the Oregon Bureau of Labor and Industries website or the U.S. Department of Labor’s website.

WATCH OUT FOR THE NEW PAYCHECK RULES

Up until now, if an employee’s paycheck was less than the total amount owed, it was the employer’s option whether to write a special paycheck to make up the difference or require the employee to wait until the next scheduled payroll.  Some employers might write a special paycheck if the error was the employer’s fault (e.g., data entry error), but would refuse to do so if the employee was responsible for the error (e.g., employee failed to turn in his time sheet on time, or the time sheet was illegible).   Beginning on January 1, 2008, employers will be required to pay the shortfall under certain circumstances.

Specifically, beginning on that date, if an employer discovers that an employee was not paid the full amount owed, there is no dispute about the amount still due, and the amount due is at least 5% of that employee’s gross wages usually paid during that pay period, the employer must pay the full amount still due within three days (excluding Saturdays, Sundays and holidays) of discovery.  If the amount owed is less than 5% of the employee’s gross wages due on that payday, then the employer must pay the full amount no later than the next regular payday. 

HOLIDAY BONUS

Many employees enjoy bonuses during the holiday season.  Depending on the type of bonus, an employer may be required to apportion the amount of the bonus back over the workweeks of the period in which it was earned, which will result in an adjustment of the regular rate and possible additional overtime liability.  In determining if a bonus is the kind that must be included in regular rate calculations, the Department of Labor regulations look at whether the bonus is a discretionary bonus, gift or payment in the nature of a gift, or whether it is a promised bonus, or a bonus announced to employees to induce them to work more steadily, rapidly or efficiently.  A discretionary holiday bonus would not be included in the regular rate calculation unless it is measured by or directly dependent upon hours worked, production or efficiency.  The regulations governing bonuses are set forth in 29 C.F.R. § 778.208 through 778.215.