Understanding Wage Deductions Under Massachusetts Law
Navigating Wage Deductions in Massachusetts: What Employers Need to Know
The Massachusetts Wage Act governs the timely payment of wages, but it's essential to grasp the limitations regarding paycheck deductions. Many employers aren't aware that only a few deductions are allowable under state law, and improper deductions can lead to Wage Act violations and potential triple damages.
The Allowable Deductions
The Wage Act permits "valid set-offs" for employees paid a salary or hourly wage. In the case of commission payments, deductions must adhere to what is "allowable or authorized." Deductions that serve the employer's interests rather than the employee's are prohibited. Some allowable deductions include union dues, income taxes, and health insurance premiums—deductions that align with statutory authorization and benefit the employee.
Taxes and Benefits
Employers must withhold federal and state income taxes and social security taxes from employee wages, remitting these amounts to the appropriate taxing authorities. Employees can manage tax withholdings by adjusting their Form W-4 exemptions. Employers can also deduct pre-tax payments for employee benefits such as health, life, and dental insurance.
Employee Liabilities or Obligations
When an employee has financial obligations to the employer, such as damage to company property or loans, the employer can hold them responsible. However, due process must determine the employee's obligation, and clear, agreed-upon policies are essential. Employee loans should follow legal guidelines, especially for larger sums, and employers should proceed with caution.
Garnishment or Liens
Court-ordered garnishments, like child support or civil judgments, may result in wage deductions. However, there are strict limits on the amount that can be garnished, and employers must ensure compliance with the garnishment order and relevant laws.
Training or Signing Bonus Reimbursement
Agreements that require employees to repay certain amounts on termination, like relocation expenses, initial training costs, or signing bonuses, are valid if they create an employee obligation. However, employers should avoid unilaterally withholding these funds from a final paycheck and follow established procedures.
The Special Case of Commission Based Employees
Commissions are considered wages under the Wage Act, but deductions from commissions can be complex. Different commission structures may have varying interpretations of "allowable or authorized deductions." It's advisable for employers to seek legal counsel for clarity before implementing deductions against commissions.
Best Practices for Payroll Deductions
Employers should exercise caution when making payroll deductions to avoid violating state and federal laws. Written documentation for all deductions, signed authorizations for tax deductions, and careful consideration of commission structures are essential best practices to ensure compliance and protect both employees and employers.
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