Oftentimes when an employee leaves a company in North Carolina, they may be in possession of company-issued equipment, like a phone, tablet, or laptop. Imagine that it’s day three since the employee quit, and human resources has tried to get in touch with the (now) former employee to coordinate the return of this equipment. It’s radio silence. No responses. Nothing. It may be tempting to calculate the market value of that company-issued equipment and deduct it from the employee’s final paycheck, but not so fast. Not without the proper paperwork. In North Carolina, and most states across the country, employers cannot make deductions in situations like these without a wage deduction authorization. These authorizations can also be used for deductions in certain situations when employees are still employed by the company, including with company uniforms. In all instances, the deductions may never bring a non-exempt employee’s wages below the federal minimum wage.
To determine which type of wage deduction authorization is required is primarily based on whether the amount of the proposed deduction is known at the time of the initial wage deduction authorization. If the amount of the proposed deduction is not known in advance, the employer must use a blanket deduction authorization, which has special revocation and notice elements. If the amount of the proposed deduction is known in advance, the employer may use a specific deduction authorization.
Blanket Deduction Authorization
When the amount of the deduction is not known at the time of signing, the employer’s only option is a blanket deduction authorization, which requires the employer to have a signed written authorization from the employee that is executed before the payday from which the deduction is to be made and that states the reason for the deduction. This could be as simple as, "I, John Smith, have received a laptop from the Company for use in the course of my employment. I understand that if I fail to return the laptop upon separation from the Company, the Company may deduct the value of the laptop from my final paycheck."
Before the actual deduction takes place, the employer must give the employee a written notice of the actual amount to be deducted, and the employee must be informed in writing of their right to withdraw their authorization. If the employee chooses to withdraw their authorization, they must communicate the withdrawal in writing to the employer.
Specific Deduction Authorization
When the amount of the deduction is known at the time of signing, the employer may utilize a specific deduction authorization, which requires the employer to have a written authorization from the employee executed before the payday from which the deduction is to be made and that states:
- The reason for the deduction; and
- The specific amount of the deduction.
The employee is not entitled to withdraw this type of deduction once signed if it is known and agreed upon in advance.
States outside of North Carolina may have other requirements for making deductions from the pay of workers who have left a company.
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