Lawyers Bees! Employer quietly taking deductions from paycheck; legal or no?

posted 2 years ago in Legal
  • poll: Deducting money from paychecks without showing the deduction on the check... illegal. : (12 votes)
    57 % legal. : (3 votes)
    14 %
    ...depends. Explain. : (6 votes)
    29 %
  • Post # 2
    3756 posts
    Honey bee
    • Wedding: April 2014

    Are other taxes being taken out or is your husband a contractor that gets a 1099? Is this money that already had taxes taken out of it? Like it was 1600 but your DH only saw 1200 of it and is now paying back what he got plus the taxes?

    Post # 3
    941 posts
    Busy bee
    • Wedding: April 2015

    What are the chargebacks for? Expenses that were already reimbursed?

    Post # 4
    250 posts
    Helper bee

    Where are you located?

    Post # 5
    332 posts
    Helper bee

    countingstars:  By “chargebacks”, I assume you mean refunds? We pay the healthcare providers that I recruit on a commission basis (similar to a salesperson). Their commission from any of their patients who receive refunds are deducted from their next check. We do tell them who they are for, and the amounts. However, we don’t have to. The procedure for refunds and how it correlates to their pay is specifically outlined in their signed contracts. We just take the extra time to list who the refunds are for and the amounta solely to be transparent.

    If the provider is a regular standard (taxed) employee, the taxes are factored in accordingly. If the provider is instead an independent contractor (1099) there are not any taxes factored in. This is because there were never taxes deducted in the first place. That is the responsibility of the contracted employee to figure and file when the time comes. I am located in FL. So, I don’t know if/how the laws vary elsewhere. 

    Post # 8
    13 posts

    Normally the only time your employer can deduct wages is for an income tax,  Social Security, or similar withholding– Or for the purpose of funding some sort of health insurance plan. So in other words it is legal for the employer to deduct wages.

    Post # 10
    332 posts
    Helper bee

    countingstars:  I don’t quite get the social security thing. So, they are selling the product and making the money off of the customer, but refusing to pay the salesperson due to forgetting to enter a social security number during the sales process? If that SS# is essential in the sale actually being processed, than it means the sale would be null and void if the salesperson forgets to enter it. And, either the sale is lost entirely, or someone else has to fix it for it to be valid. So, the salesperson who made the error may not get paid for it. That’s not entirely unreasonable. If the sale still goes through fine with zero hangups (despite the missing number), than they are just finding a loophole to not have to pay the salesperson.

    As for the tax issue… We will use 20% in taxes just for an estimation. If, for instance, he sells ten vacuums at a commission of $100 each. He gets a check for $800 ($1000, less taxes). Perfect.

    The next week, he sells ten more vacuums. However, he also had one return in that time frame. He should than be getting paid for the equivalent of the difference of the nine vacuums ($900), less 20% taxes off of THAT amount. So, for a total of $720. NOT 20% off the ten vaccums, and than less the original full $100 refund on top of that (which would be $700). 

    The next thing is… If you SO sells a vacuum, which is than returned, his employer has to refund the consumer. So, they don’t make any money on that. They only make the money back once it’s sold again. And, whichever salesperson (if any) sells it at that point, they should be the ones to get the commission on it. The company is still only making a profit once. 

    And, lastly… You won’t know if they are pocketing money. If they aren’t documenting it and paying taxes on it, than that’s wrong. However, that would all depend on how it’s being applied/deducted. If his employer writes him some random check without an explanation (pay stub) showing related taxes that were applied, than I would question it for sure. However, if it’s like I stated above, than I’d say it sounds legit. 

    There’s just too many factors to say for sure. And, again, I’m in a different state. It really depends on what work he does exactly, what the policies were upon being hired, what his pay stubs look like, etc.

    If you truly think they are doing something shady, you can contact an employment attorney who could better evaluate all of those factors. They would be able to tell you if he has a case, and if he should fight for back pay. Go with all paystubs and documentation. The other option is to formally report his concerns with whatever Association oversees his industry, who may than open an investigation into the company (possibly perform an audit, request records, etc.)

    Post # 12
    187 posts
    Blushing bee

    countingstars:  I am not seeing anything illegal here. First is the compensation issue. As long as they compensate him according to his employment contract (if he has one) and his pay is above minimum wage, then it is legal. If the companies policy is that sales information must be entered fully and completely to be compensated for it then if he does not enter the information fully and completely then they do not have to compensate him, this type of policy is a little shady, but it is not illegal. 

    I suspect that the reason the pay is given, then later back charged is because they pay based on the sales he reports, and then check and balance everything after, this is when they discover that the information is incomplete. They then deduct the difference from his commission for reported sales in the next pay period. Basically they over paid him X amount in pay period 1 so they underpay him the same amount pay period 2. As long as the total for the pay periods is the correct total per his contract (even the policy is sketchy) then there is nothing illegal going on here. If he should be pad $1000 in each pay period, then they realize one of his sales was not entered correctly (or was returned) so he is due $200 less in the first pay period, there is no difference between them deducting it from the second, then there would be had they held his first period commission until all sales were reviewed. He was due $800 ($1000-$200 for the incorrectly entered sale) in the first, and $1000 in the second, he was paid $1000 in the first, and $800 in the seconds, in both cases he was paid and taxed on $1800, the correct amount. This is a common method used to pay commissioned sales people; it is to keep their cash flow coming even if processing of sales is delayed. As long as his pay does not dip below minimum wage there is nothing illegal here.

    The other example you gave makes perfect sense. If an item is returned then he should not be due commission, even if it can be resold. The employer does not make extra money this way. Item is sold for $1000, $200 in commission is paid, and the employer nets $800. The item is then returned, employer refunds the $1000, and is now out $200, this is charged back from your husband, so the employer breaks even again since the sale was reversed, the employer has the item, the customer has his $1000 back, and your husband has nothing, just as though it never happened. If the item is resold, then the new customer pays the $1000, they get the item, and the salesman gets the $200, the employer still only nets $200. Commissioned salesmen make a portion of the money they make for the company, when an item is returned, and the money is refunded, the company makes nothing so the salesman is due nothing.

    This business model, of not paying commission if information is missing, despite the sale still going through is a little sketchy, but not illegal at all. If people don’t like the policy, or feel they are not fairly compensated because of it their only recourse is to negotiate with the company, or seek employment elsewhere. If the employer has issues retaining employees then they may address the policy, but until then they have no incentive to change anything.


    • This reply was modified 2 years, 3 months ago by  MakingHerWait.
    Post # 14
    1007 posts
    Bumble bee
    • Wedding: November 1999

    MakingHerWait:  is completely right. This practice is not illegal, or even “sketchy”. This is a fairly standard practice. 

    Post # 15
    499 posts
    Helper bee
    • Wedding: September 2014

    It’s commission. 

    Employeer-sold item, pays comission

    Employee- paid comission

    Customer-returns product

    Employee- comission voided


    That makes a whole lot of sense.  Or else eveyone in their mother could come in, buy from the business, pump up employees comission then return every item.

    Yeah, my brother works on comission.  If an item came back in it was taken out of his comission at the end of the month.  If the sale and return crossed over a month it came from his next paycheck.


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