Recovering the employer’s property can be a major struggle when an employee leaves their job – especially if their separation is not voluntary. All of the sudden, tools, phones, laptops and the like are suddenly lost, stolen or are returned with so much damage that it’s often not worth the cost of repair. Wouldn’t it be nice if the employer could hold the worker responsible for the cost of replacing or repairing lost, stolen or damaged property. In many instances, the employer can do this, but it takes a little planning.
First, let’s address what employer’s cannot do, although many try. Employers cannot condition receipt of an employee’s final paycheck on the worker’s return of all of the employer’s property in their possession. The Wage Payment and Collection Act requires that an employee’s final wages be paid no later than the next regular pay date of the employer. You can see how this could conflict with holding a paycheck until an employee returns all of the employer’s property. Don’t do it. That’s not to say, though, that an employer cannot suggest to a separating employee that they can return any of the employer’s property when they retrieve their last paycheck. You just can’t hold the check if the worker doesn’t return everything.
The other issue is when a separating employee returns a laptop that looks and works like it’s been dropped several times from the top of the stairs, or the employee says “That cell phone? I was just about to tell you that I lost that the other night or it was stolen from me.” This is when many employers get the urge to deduct the cost of the item from the employee’s paycheck. As we said, this might be fine if you plan ahead.
First of all, the Wage Payment and Collection Act prohibits an employer from make\ing deductions from an employee’s paycheck (except for taxes, wage deductions and very limited other reasons) without the employee authorizing the deduction in writing. Getting this written authorization at the time that an employee is leaving is obviously not the best timing.
Rather, establish a policy that notifies employees that they are responsible for the cost of replacement or repair of lost or damaged employer property in their possession. You can also include stolen property in that policy unless the employee makes a police report and provides you with a copy.
Secondly, have employees sign a receipt for employer issued property such as tools, tablets, phones etc and include in that receipt an authorization that the employer can withhold the replacement or repair cost from the employee’s paycheck should it be lost or damaged.
Be mindful of two significant caveats. Employers should not enforce this policy against exempt employees. The Department of Labor has held that deductions from pay of exempt workers for the cost of lost or damaged property will break the exemption and convert the worker to a non-exempt employee.
Additionally, any deduction made for lost or damaged property cannot reduce a worker’s pay below that of minimum wage. While this may result in an employer not recovering the entire cost of replacement and repair, it will hopefully defray the cost and deter workers from taking their revenge on their employer’s property.