What can be deducted from gross wages? (Part two)

Posted in Employment and Labor at 10:50 am by Michael Dalrymple

What can be deducted from gross wages? 

Whether you receive a paycheck or issue payroll, you are likely very familiar with the many deductions from gross pay.  Most of these deductions are for taxes or other benefits like social security and insurance.  An employer may also deduct other items from a paycheck, but only if specifically permitted and if all requirements are followed. 


Regulations permit employers to round employees’ time worked (i.e., recording an employee’s starting and stopping times to the nearest five minutes, one-tenth of an hour, or one-quarter of an hour).  Although this actually constitutes a pay deduction, the protection for employees is that any such arrangement by an employer must average out so that the employees are fully compensated for all the time they actually worked. In other words, the “rounding up” of time worked must happen roughly as often as “rounding down.” Although minor differences between clock records and actual hours worked cannot always be avoided, major discrepancies should be eliminated as they raise doubt as to the accuracy of the records of the hours actually worked. As an enforcement policy, the Department of Labor typically does not question records which show an actual start time of up to 15 minutes before the clock-in time.  The Department will carefully review any difference greater than 15 minutes.

Permissible Wage Assignments

Indiana only allows deductions to be made from wages for certain reasons specified by statute and only if certain procedural safeguards are met. Deductions made from an employee’s wages generally are defined as a “wage assignment.” An assignment of the wages of an employee is valid only if the assignment is:

v         in writing;

v         signed by the employee personally;

v         revocable at any time by the employee upon written notice to the employer; and

v         agreed to in writing by the employer.

In addition, the employer must provide to the employee an executed copy of the assignment within 10 days after its execution.

Indiana law permits the following types of wage assignments: 

v         Premium on a policy of insurance obtained for the employee by the employer;

v         Pledge or contribution of the employee to a charitable or nonprofit organization;

v         Purchase price of bonds or securities, issued or guaranteed by the United States;

v         Purchase price of shares of stock, or fractional interests therein, of the employing company, or of a company owning the majority of the issued and outstanding stock of the employing company, whether purchased from such company, in the open market or otherwise;

v         Dues to become owing by the employee to a labor organization of which the employee is a member;

v         Purchase price of merchandise sold by the employer to the employee, at the written request of the employee;

v         Amount of a loan made to the employee by the employer and evidenced by a written instrument;

v         Contributions, assessments, or dues of the employee to a hospital service or a surgical or medical expense plan or to an employees’ association, trust, or plan existing for the purpose of paying pensions or other benefits to the employee or to others designated by the employee;

v         Payment to any credit union, nonprofit organizations, or associations of employees of such employer organized under any law of Indiana or the United States;

v         Payment to any person or organization regulated under the Uniform Consumer Credit Code for deposit or credit to the employee’s account by electronic transfer or as otherwise designated by the employee;

v         Premiums on policies of insurance and annuities purchased by the employee on the employee’s life;

v         The purchase price of shares or fractional interest in shares in one or more mutual funds;

v         A judgment owed by the employee if the payment is made in accordance with an agreement between the employee and the creditor and is not a garnishment under Indiana law.

Overpayment of Wages

If an employer overpays an employee, the employer may deduct the amount of the overpayment from the wages of the employee. Before doing so, the employer must give the employee two weeks notice. In addition, the employer may not deduct from an employee’s wages any disputed amount. A deduction by an employer for reimbursement of an overpayment of wages previously made to an employee does not constitute a fine or an assignment of wages.

When an employer makes a deduction for an overpayment from the employee’s wages, the employer may not withhold the entire amount from a single paycheck if the amount is greater than 25 percent of the employee’s disposable earnings or the amount by which the employee’s disposable earnings exceed 30 times the minimum wage rate, whichever is smaller. However, an employer may deduct the entire amount of a single gross wage overpayment if that overpayment was ten times the employee’s gross wages due to a misplaced decimal point.

Impermissible Deductions

It is illegal for any employer to impose a fine against an employee and to deduct the fine from the employee’s wages for any reason.  As noted in my previous article, the cost of “facilities” which are provided primarily for the employer’s benefit, which includes the cost of uniforms and of their laundering where the nature of the business requires the employee to wear a uniform, can not be included as wages.  If the employer requires an employee to pay this cost, the payment is treated as a deduction from the employee’s pay. If that deduction results in the employee receiving less than the minimum wage, the deduction is not permitted as it will violate the minimum wage requirements.

This problem is common in the restaurant industry, where employers provide uniforms, but require employees to launder the uniforms on their own time and at their own expense. When those employees are paid the bare minimum wage, the employer has been found liable for the reasonable cost of laundering and an estimate of the time spent by the employee performing this task. If, however, the employee is paid sufficiently more than minimum wage to cover this cost, there is no liability. A similar calculation is required if an employee is required to pay for tools and/or other supplies necessary for carrying out the employer’s business, or to pay for transportation required by the employer as a necessary part of employment, or to pay for any other normal and customary business expense of the employer. 

For more information about this or other legal topics, please e-mail Michael Dalrymple.



What are Wages: Part One

Posted in Employment and Labor at 11:56 am by Michael Dalrymple

What are wages?

This is the first of a three-part article on wages. 

Everyone knows what constitutes a wage, right?  It is not as obvious as it seems.  The Fair Labor Standards Act (“FLSA”) defines wages and specifically provides for what an employer must include in an employee’s wage and the permissible exclusions.  So why is this important?  An employee’s wage determines their amount of overtime. 

Non-Cash Payments are Wages

The FLSA defines the term “wage” to include things other than just an employee’s paycheck.  It includes the “reasonable cost” to an employer of furnishing an employee with such things as board, lodging, or “other facilities,” if such board, lodging, or other facilities are customarily furnished by the employer to its employees.   The “reasonable cost” cannot exceed the fair market value of what is provided to the employee.  Moreover, the employee’s acceptance of the board, lodging or other facilities must be voluntary.  The term “other facilities” includes: 

v         Meals furnished at company restaurants or cafeterias or by hospitals, hotels, or restaurants to their employees;

v         Meals, dormitory rooms, and tuition furnished by a college to its student employees;

v         Housing furnished for dwelling purposes;

v         General merchandise furnished at company stores;

v         commissaries (including articles of food, clothing, and household effects);

v         Fuel (including coal, kerosene, firewood, and lumber slabs);

v         Electricity, water, and gas furnished for the noncommercial personal use of the employee; and

v         Transportation furnished for employees between their homes and work where the travel time does not constitute hours worked compensable under the FLSA and the transportation is not an incident of and necessary to the employment. 

The cost is not a wage if the employer furnishes the “ other facilities” or items primarily for its own benefit or convenience. Examples of this that have been found to be primarily for the benefit or convenience of the employer include: 

v         Tools of the trade and other materials incidental to carrying on the employer’s business; and

v         The costs of uniforms and their laundering.

Importantly, if an employer provides non-cash compensation, its reasonable costs must be included in the regular hourly rate for the purpose of calculating overtime.

For more information about this or other legal topics, please e-mail Michael Dalrymple.



More on Bullying in Schools

Posted in Education at 9:17 am by Michael Dalrymple

More on Bullying in Schools

In a very timely and very disturbing New York Times article, we learn just how tragic unchecked bullying can be.  As I recently reported in my blog, courts are trying to define the line between the first Amendment rights of students and a school’s ability to restrict speech.  As made obvious in this article that speech can end with deadly results.  


For more information about this or other legal topics, please e-mail Michael Dalrymple.




Bullies are not just for Playgrounds Anymore

Posted in Education at 10:24 pm by Michael Dalrymple

Bullies are not just for Playgrounds Anymore

It appears that we will always have to “manage” our bullies. They were once just on playgrounds, but are now in our offices and on the internet. When the bullying occurs on a playground, a teacher can issue appropriate discipline and stop the behavior through direct intervention. The solution is not so obvious when the bullying occurs off campus and online. Two recent Third Circuit decisions examine online offensive behavior and provide some direction for schools in their attempts to limit such behavior. Whether the conduct constitutes “bullying” is a discussion for another time, but no matter the name, it is of great concern for school officials.

Before turning to the two recent decisions, a brief lesson on a school’s legal ability to curtail student speech under the First Amendment. The following four tests are used by courts to determine whether a student’s rights were violated when a school either prohibited speech or disciplined the student for the speech. Notably, in all four of these tests, the student speech occurred on campus. It appears that courts are also willing to apply these four tests to speech that occurs off campus.

(1) The Tinker Test:
This test permits school restrictions on student speech if the speech caused, or was likely to cause, a “substantial disruption or material interference with school activities” or an “invasion of the rights of others.”
Tinker v. Des Moines Independent Community School District, 393 U.S. 503 (1967).

(2)The Fraser Test:
This test permits schools to regulate “sexually explicit, indecent or lewd speech.” Importantly, for this test the school need not demonstrate a disruption.
Bethel Sch. Dist. v. Fraser, 478 U.S. 675 (1986).

(3) The Morse Test:
This test permits schools to regulate “speech that can reasonably be regarded as encouraging illegal drug use.”
Morse v. Frederick, 551 U.S. 393 (2007).

(4) The Hazelwood Test:
This test permits schools to regulate “school sponsored” speech if the speech is inconsistent with the school’s “basic educational mission.” Courts define “school-sponsored speech” as speech that is “part of the school curriculum” or “supervised by faculty members”. This test includes most school-sponsored activities such as yearbook, student government, newspaper, and the theater.
Hazelwood Sch. Dist. V. Kuhlmeier, 484 U.S. 260 (1988).

Now back to the off-campus speech. The issue before the court in the two cases below was offensive speech uttered by a student online.

The first case was in Pennsylvania , Layshock v. Hermitage School District (3rd Circ. feb. 4, 2010). The student created a fake MySpace profile for his Principal. In this profile, the student provided the following information:

Birthday: “to drunk to remember”
Are you a health freak: “big steroid freak”
In the last month have you smoked: “big blunt”
In the last month have you been on pills: “big pills”
In the last month have you gone Skinny Dipping: “big lake, not big dick”
In the last month have you stolen anything: “big keg”
Ever been drunk: “big number of times”
Ever been called a tease” “big whore”
The list continued. Apparently, the student focused on the large size of the principal. After learning of this post, the school suspended the student.

The court addressed two issues:
(1) Whether “a school district can punish a student for expressive conduct that originated outside of the classroom, when that conduct did not disturb the school environment and was not related to any school sponsored event.” Id.
(2) Whether “the extent to which this school district’s response to a student posting on the internet interfered with the substantive due process rights of the student’s parents.” Id.

The court quickly dismissed the “substantial disruption” (the Tinker Test), even though the school canceled computer classes and limited student access to computers until the author of the profile was found. Instead, the court applied the “sexually explicit, indecent or lewd speech” test from Fraser. Applying this test, the court held that the school violated the student’s First Amendment rights when it suspended him for the off-campus speech. In short, the student’s speech did not warrant the school reaching off campus to punish the student.

In a second off-campus speech case, the court applied the Tinker Test and held that the school could discipline a student for off-campus speech, because the speech reasonably threatened to cause a substantial on-campus disruption. In J.S. v. Blue Mountain School District (3rd Circ. feb. 4, 2010), an eighth grader created yet another fictitious profile on MySpace. The profile included the following:

yes. it’s your oh so wonderful, hairy, expressionless, sex addict, fagass, put on this world with a small dick PRINCIPAL
I have come to myspace so i can pervert the minds of other principal’s to be just like me. I know, I know, you’re all thrilled
Another reason I came to my space is because — I am keeping an eye on you students (who i care for so much)
For those who want to be my friend, and aren’t in my school I love children, sex (any kind), dogs, long walks on the beach, tv, being a dick head, and last but not least my darling wife who looks like a man (who satisfies my needs)
so please, feel free to add me, message me whatever”
Id. (only the formatting of text has been altered).

The student also referred to the Principal as a “pedophile” and “sex addict”. Interestingly, the court’s holding discounted the actual disruption that took place as minor, but held that: “the profile presented a reasonable possibility of a future disruption, which was preempted only by [the Principal’s] expeditious investigation of the profile, which secured its quick removal, and his swift punishment of its creators.” Id.

These two decisions will likely shape future decisions in this growing body of law. Schools must fully evaluate the situation prior to issuing any discipline for off-campus speech. An investigation must include documentation of all disruptions and potential disruptions and the access to the violating speech by students while on campus. 

For more information about this or other legal topics, please e-mail Michael Dalrymple.




Social Networking and the workplace

Posted in Employment and Labor at 2:12 pm by Michael Dalrymple

Social Networking and the workplace

What was once the fence line became the telephone and is now the internet.  As more and more people use Facebook and Twitter as their personal venting space, employers raise concerns over the content of posts.  A conversation over the fence line was very private and the telephone offers similar protection, but not the internet.  While the town gossip was once in charge of spreading juicy tidbits and your latest complaint, a single mouse click can broadcast your opinion of your employer’s attendance policy to millions. 

There is a very interesting legal tension between free speech rights of employees to state their opinions and employers’ desire to limit the airing of dirty laundry.  My best advice to employees is to only post on Facebook or Twitter what you would e-mail to your boss.  Employers should take precautions to insure their reputation is not being muddied online and at the same time be aware that not all speech, even very damaging speech, cannot be silenced. 

The following article from the New York Times discusses a new technology that should make both employees and employers take notice of just how public our once private complaints have become. 

To read the article, click on the following link:


For more information about this or other legal topics, please e-mail Michael Dalrymple.




School Districts Challenge another State Funding Formula

Posted in Education at 11:28 am by Michael Dalrymple

School districts challenge Yet another school funding formula.  This time it is in Illinois. 

Click here for details

For more information about this or other legal topics, please e-mail Michael Dalrymple.



Tax Incentives for newly hired and retained employees

Posted in Employment and Labor at 11:18 am by Michael Dalrymple


The Hiring Incentives to Restore Employment Act, also known as the  “HIRE Act”, is now law, following President Obama’s signature on March 18, 2010.  the law’s intent is to “encourage businesses to hire and help put Americans back to work.”

The HIRE Act provides tax incentives for employers which include any non-governmental business or organization and public institutions of higher learning.  The incentives include: 

v         An exemption from paying the Social Security excise tax on the wages of any newly hired “qualified employee” for wages paid between March 9, 2010 and December 31, 2011. 

In order to qualify, a “qualified employee”:

(1) must be hired after February 3, 2010 and before January 1, 2011; and

(2) cannot have worked more than a total of 40 hours in the two months prior to being hired; and

(3) was not hired to replace an employee terminated from employment without cause.

v         The HIRE Act also provides up to a $1,000 tax credit to the employer for each “retained worker.”

A “retained worker” must:

(1) meet the “qualified employee” requirements of the HIRE Act; and

(2) be employed for at least 52 consecutive weeks; and

(3) have wages during the last 26 weeks of the taxable year that are equal to at least 80% of the wages earned during the first 26 weeks of the year. 

While the requirements of the HIRE Act are somewhat restrictive and a little tricky, they will grant some tax relief for some employers.  Whether the Act will encourage businesses to hire more employees remains to be determined. 

For more information about this or other legal topics, please e-mail Michael Dalrymple.




Healthcare Reform

Posted in Disability Law at 11:19 am by Michael Dalrymple


On March 21, 2010, the House of representatives sent the long-debated healthcare reform bill to President Obama for his signature.  The Senate must still pass the Reconciliation Bill in order to include changes required by House members. 

So what does the legislation provide to adults and children with disabilities?  The law will eliminate lifetime limits and restrictive annual limits on benefits in all plans.  This is a long overdue provision.  The law will also ensure consumers have access to an effective internal and external appeals process to appeal new insurance plan decisions.  Moreover, it will require premium rebates to enrollees from insurers with high administrative expenditures and require public disclosure of the percent of premiums applied to overhead costs.

Ninety days after enactment, the law will provide immediate access to insurance for uninsured Americans who are uninsured because of a pre-existing condition through a temporary high-risk pool

Six months after enactment, the law will: 

prohibit pre-existing condition exclusions for children in all new plans;

prohibit dropping people from coverage when they get sick in all individual plans;

require plans to cover an enrollee’s dependent children until age 26. 

The law is complex and contains many provisions that will impact on the lives of individuals with disabilities.  Stay tuned for future updates.

For more information about this or other legal topics, please e-mail Michael Dalrymple.




workplace Violence Policies and the New Gun Law

Posted in Employment and Labor at 11:32 am by Michael Dalrymple

Time to revisit your workplace violence policy

As I am sure you are well aware, the Indiana Legislature passed a bill and Governor Daniels signed it into law that permits employees to bring their guns to work, even if the employer has a policy prohibiting guns at the workplace.  The debate over this bill waged Second Amendment Constitutional rights against safety concerns in the workplace.  A review of the blogosphere reveals that gun advocates are elated and many business owners, managers, supervisors, and employees are a little nervous.  No matter your opinion, it is now the law, so here are the essentials. 

The law prohibits an employer, which includes an individual, a corporation, and a governmental entity, from adopting or enforcing a policy that prohibits an employee, including a contract employee, from: 

 (1) legally possessing a firearm or ammunition that is locked in the trunk of the employee’s vehicle,

(2) kept in the glove compartment of the employee’s locked vehicle, or

(3) stored out of sight in the employee’s locked vehicle while the vehicle is in or on the employers property. 

Firearms or ammunition that requires a federal license to possess are exempted. There are several additional exemptions in the law.  These are mainly exempted locations, including: 

(1) on school property, on property used by a school for a school function, or on a school bus;

(2) on certain child care and shelter facility property;

(3) on penal facility property;

(4) in violation of federal law;

(5) on property belonging to an approved postsecondary educational institution;

(6) on the property of a domestic violence shelter;

(7) at a person’s residence;

(8) on the property of a person that is subject to the United States Department of Homeland Security’s Chemical Facility Anti-Terrorism Standards and licensed by the United States Nuclear Regulatory Commission;

(9) on property owned by a public utility that generates and transmits electric power or a department of public utilities; and

(10) in an employee’s personal vehicle if the employee is a direct support professional who uses the employee’s personal vehicle while transporting an individual with developmental disabilities.

One provision of the law is a recent movement in state legislatures that limits the jurisdiction of courts over certain legal action.  The law provides that a court does not have jurisdiction over an action that:

(1) is brought against an employer who is in compliance with the prohibition against adoption or enforcement of a policy or rule that prohibits the possession of a firearm in a locked vehicle; and

(2) is brought to recover for any injury or damage resulting from the employer’s compliance.

While this provision protects business owners, it does limit access to courts, which is often the only remedy to enforce rights.  At the same time, the law authorizes a person harmed by a violation to bring a civil action for damages, costs, attorney’s fees, and injunctive relief to remedy a violation. 

If you have a workplace violence policy in place, it may require modification to comply with the law.  If you do not have a workplace violence policy in place, this would be a good opportunity to implement one. 

For more information about this or other legal topics, please e-mail Michael Dalrymple.





Posted in Employment and Labor at 2:37 pm by Michael Dalrymple

More and more of the unemployed are relying on COBRA to subsidize their healthcare costs.  The subsidy is important for many who are in between jobs, but it is not to be relied upon for long-term use.


For more information about this or other legal topics, please e-mail Michael Dalrymple.



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