Federal Contractors are usually well acquainted with the federal Fair Labor Standards Act (FLSA) because their federal contracts expressly require them to comply will all applicable federal laws. So federal contractors routinely confront wage issues such as whether employees are “exempt” or “non-exempt”, are they recording their work hours, and are they being paid appropriately for any overtime work. However, state wage laws often require employers to consider different factors than those required by federal law.
Improper Wage Deductions happens more than you think
Federal contractors are often surprised to learn that no federal law governs non-tax deductions from employees’ paychecks. Common wage deductions for things such as federal and state taxes, health insurance, 401(k) plans, and FSA/HSA accounts are universally acceptable deductions, so long as the employee authorizes them.
But what about payroll deductions for lost company property (i.e., cell phone or laptop)? What if an employee resigns with a negative vacation balance? How about if the employee charges personal items on a company credit card? Can employers deduct from an employee’s wages to repay a loan or tuition assistance? The short answer: it depends on the state in which your employee works. Some will allow wage deductions for almost anything, so long as the employee agrees in writing to the deduction. In other states, employers can deduct hardly anything other than taxes and benefits from an employee’s wages, even if the employee agrees to the deduction.
States Also Differ on Employees’ Final Paycheck
Speaking of wages…Federal contractors frequently assume that they are able to deduct from an employee’s final paycheck for unpaid loans, vacation balances, unreturned cell phones, etc. That is not always the case. Many states have specific laws applicable to the employee’s final pay that make it difficult to deduct anything from the employee’s final paycheck. Regrettably, state law is all over the map on the issue of wage deductions, so there is no “one size fits all” solution.
Traditionally, employees who resigned or were fired got their final paycheck on the “next regularly scheduled payday.” That is still the case in many states, such as Arkansas, Virginia, Washington, West Virginia, Pennsylvania, and Wyoming. However, some states have adopted shorter timeframes. In California for example, employers have to pay employees on the day of their termination or within seventy-two (72) hours if the employee quits without notice or gives less than seventy-two (72) hours’ notice. Similarly, in Oregon, terminated employees must be paid immediately, and within forty-eight (48) hours if they resign with advance notice.
To make matters more confusing, states often have differing pay dates depending upon whether the employee is involuntarily terminated or is resigning voluntarily with notice. In Texas, employers must pay fired employees within six (6) days, while they may wait to pay resigning employees until the next regularly scheduled payday. Similarly, Vermont employers must pay fired employees within seventy-two (72) hours, while it can wait until the next regularly scheduled payday for those employees who voluntarily quit.
State Wage Notice Requirements Vary
Did you know that state laws differ about what employers tell employees about their wages? Most federal contractors that do business in multiple states use the same payroll system, no matter what states in which their employees work. This can present problems where some company employees work in states with specific wage statement requirements.
Take Washington, D.C. for example. At the time of hiring, employers must provide their D.C. employees with a written notice containing (among other things), the name of the employer, any “d/b/a” name, the employer’s physical address, telephone number, the employee’s rate of pay, and the employee’s regular payday. By contrast just across the river in Virginia, there is no written notice requirement. While in Maryland, employers need not provide a “written notice”, but must inform new employees of their regular payday, and applicable Leave benefits. By contrast, some states such as North Dakota, New Mexico, Missouri, Mississippi, and Michigan have no wage notice requirements at all.
No Need to Tackle These Issues Alone
State wage laws can be complex, confusing, and difficult to administer if your workforce is spread across multiple jurisdictions. For over 25 years, C2 has specialized in helping our federal contracting clients navigate the intricacies of both federal and state wage and hour laws, so that your employees remain happy and your company remains compliant.
C2 provides strategic HR outsourcing to clients who want to develop optimal workforce strategies and solutions to allow them to be more competitive and profitable. C2 blog posts are intended for educational and informational purposes only.