Wage Deductions in California - What to Know

California Labor Code has very strict regulations in regards to what can be withheld from an employee’s pay check. It is crucial that you make yourself familiar with these laws. 

You MUST Dot Your I’s and Cross Your T’s

Like most states, there are the deductions that are authorized by state or federal law. However, these are somewhat limited. 

The required-by-law deductions, employees’ authorized insurance premiums or hospital or medical dues, those for covering health and welfare pension plan contributions authorized by a collective bargaining agreement, and other deductions with specific regulations are all permitted.

Of course the normal tax withholdings, garnishments, and court orders are part of what is considered a permitted deduction from an employee’s pay.  When referring to “other deductions”, the indication there is for deductions that will benefit the employee. This might be for items purchased from the company store or stock purchases. What is not considered “other deductions” and cannot be withheld from the employee would include fees for a product or service, use of company facilities, etc.

Another area that is unique to businesses in California is that he employer must absorb all costs for employees’ mistakes. If an employee causes damages due to negligence, the employer may not withhold the costs for repair from the employee. Also, any returned items cannot be withheld from an employee’s commissions if they are not specific to the individual who made the sale.  Company losses cannot be used to reduce any pay an employee is to receive.

When an employee leaves the company, the employer may not deduct for items not returned. The employer must absorb that cost. Another area where employers must absorb the costs for an employees is in the case of overpayment.  If an employee is overpaid due to error, these monies may not be withheld from the employee.  Also, employers may not withhold from employees for theft or losses resulting from a third party

Any losses the company may incur that result from an employee’s negligence, theft, unreturned items, etc. will be absorbed by the company unless they wish to take the loss to the California Court of Appeal.

A rule of thumb would be to withhold government required items, insurance premiums authorized by the employee, pensions authorized by a collective bargaining agreement, and question all other deductions.  If in doubt, do not withhold, as you may end up violating California Law. For more info visit https://www.dir.ca.gov/dlse/FAQ_Deductions.htm

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