California law severely restricts the circumstances in which an employer may deduct damages or debts owed by employees from their wages. An employer may not deduct from an employee’s wages any amount to compensate the employer for loss or damage caused by an employee’s simple negligence. It may deduct an amount sufficient to compensate for loss or damage resulting from an employee’s gross negligence, willful misconduct or dishonesty. However, the burden of proof is on the employer to establish that such deduction is appropriate.
Additionally, an employer may not deduct any amount from an employee’s final paycheck to recover an unpaid debt (such as a loan or cash advance) unless the employee specifically agrees to the deduction in writing at the time of termination.
Before you deduct any sum from an employee’s wages, discuss the matter with your employment attorney. If the deduction is not properly authorized, your business may be subject to extensive legal penalties.
The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.
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