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Wage Deductions Under Massachusetts Law
Most employers know that the Massachusetts Wage Act requires timely payment of all wages. What many do not understand are the limitations on what can be deducted from employee paychecks. The truth is very few deductions from pay are allowable under state law. Improper deductions could be a violation of the Wage Act and subject the employer to triple damages.
The Wage Act allows for a "valid set-off" from wages due to employees paid a salary or hourly wage. With respect to commission payments, it also states that such payments must be made "less allowable or authorized deductions."
Deductions that further the employer's interest and not the employee's are not allowed under the Wage Act. An employer may deduct for standard items like union dues, income taxes, or health insurance premiums. These are separately authorized by statute, and also further the interest of the employee.
In contrast, payroll deductions to cover other expenses like the cost of uniforms or other equipment that should be part of the employer's overhead expenses are probably not allowed.
The Wage Act allows for a "valid set-off" from wages due to employees paid a salary or hourly wage. With respect to commission payments, it also states that such payments must be made "less allowable or authorized deductions."
Deductions that further the employer's interest and not the employee's are not allowed under the Wage Act. An employer may deduct for standard items like union dues, income taxes, or health insurance premiums. These are separately authorized by statute, and also further the interest of the employee.
In contrast, payroll deductions to cover other expenses like the cost of uniforms or other equipment that should be part of the employer's overhead expenses are probably not allowed.
Best Practices for Payroll DeductionsBoth state and federal laws protect an employee's right to wages. Both also have strict and punitive consequences for an employer found in violation of them. For this reason, it is important to be careful as an employer. Below are some best practices you should consider.
Have written documentation for everything, including common and accepted deductions. For deductions for income tax, make sure your employees have signed a W-4 form authorizing the deduction. For health insurance premiums or union dues, you should also make sure there is signed paperwork in the employee's file. Try to avoid lending employees money. There are lots of reasons this is a bad idea from a business perspective. It can also potentially create liability under the Wage Act if you try to collect by deductions from employee wages. Do not structure your commission payments with deductions for expenses in the calculation. You are better off to consider the overall expense when determining what percent commission you will pay overall. How We Can HelpWe can help you understand your rights and obligations with respect to payroll deductions. You can use the button below to schedule a call back from a member of our team, give us a call at 781-784-2322, or fill out our web form to let us know a little more about your situation.
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