Protecting Employers Since 1985

June 2010

By: Nancy E. Joerg, Esq.

Employers are often astounded and angry to find out they cannot reimburse themselves from an employee’s final paycheck for costs and expenses such as damaged or lost property, unearned but used vacation, etc.

There are certain legal pathways under Illinois law to get around these difficult situations, but an employer must be careful to follow the regulations of the Illinois Wage Payment and Collection Act precisely. Every situation involving paycheck deductions must be carefully evaluated under state laws and regulations or the employer may face legal consequences.

Federal and state laws strictly prohibit if and how an employer can deduct from an employee’s paycheck. In Illinois, for example, an employer can only deduct from an employee’s paycheck if the deduction is:

  • To the benefit of, and approved by, the employee (group insurance premiums, credit union transactions, union dues, etc.);
  • Required by law (federal and state taxes, social security, etc.);
  • In response to a valid wage assignment or wage deduction order (garnishment, child support, etc.);
  • Made with the express written consent of the employeegiven freely at the time the deduction is made. “At the time” means the deduction(s) will be made on the next payrollafter the deduction agreement is voluntarily signed by the employee.

The Fair Labor Standards Division of the Illinois Department of Labor enforces four basic regulations covering most deductions from paychecks: (1) shortages; (2) damaged property; (3) return of employer’s property; and (4) cash advances.

Deductions from paychecks need to be done very carefully. Employers need to be aware of the complex web of laws and regulations which prevent an employer from making unilateral deductions from an employee’s paycheck. An employee’s paycheck is sacred under the law. Once an employee has earned his pay, it is legally protected and employers must treat it accordingly.

Questions? Please contact WS Shareholder and Senior Attorney Nancy Joerg at (630) 377-1554.

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