A company has agreed to pay 15,909 employees nationwide a total of $976,765 ($488,229 in back wages and an equal amount in liquidated damages) after an investigation by the U.S. Department of Labor’s (DOL) Wage and Hour Division found that the employer violated federal minimum wage requirements at its health clubs and fitness centers in 26 states.
The employer had taken deductions from employees’ pay for uniform costs. This caused workers to make less than the required federal minimum wage rate, which is a violation of the Fair Labor Standards Act (FLSA).
DOL Fact Sheet
The DOL discusses this topic in its “Fact Sheet #16: Deductions from Wages for Uniforms and Other Facilities under the FLSA.” It notes that the FLSA doesn’t require employees to wear uniforms. However, the cost and maintenance of the uniform is generally considered to be a business expense of the employer. if the wearing of a uniform is required by:
- Some other law,
- The nature of the business or
- The employer,
The employer may require the employee to bear the cost, but not if it reduces the employee’s wage below the minimum wage rate. The employer also may can’t allow that cost to cut into the overtime compensation the employee is due under the FLSA.
The FLSA requires that covered, nonexempt employees be paid at least the federal minimum wage of $7.25 per hour for all hours worked, plus time and one half their regular rates, including commissions, bonuses and incentive pay, for hours worked beyond 40 per week. When state minimum wage rates are less than the federal rate, employees must be paid the federal rate. And when state minimum wage rates exceed those of the federal rate, the state law prevails and employees must be paid the higher rate. Employers must also maintain accurate time and payroll records.
In addition to paying the back wages and liquidated damages, the company investigated by the DOL must pay civil penalties of $99,825 for violating the FLSA. The employer is also required to conduct formal training on FLSA requirements with general managers who hire, oversee, manage, and develop employment and pay practices at its locations in the United States.
Cost of Other Items
The DOL explains that at times, employers may require employees to pay or reimburse them for items other than uniforms. The cost of any items that are considered primarily for the benefit or convenience of the employer have the same restrictions as apply to reimbursements for uniforms. In other words, no deduction may be made from an employee’s wages that would reduce the employee’s earnings below the required minimum wage or overtime compensation.
Examples of some items that might be considered to be for the benefit or convenience of the employer are:
- Tools used in the employee’s work,
- Damages to the employer’s property made by the employee or other individuals, and
- Theft of the employer’s property by the employee or other individuals.
Again, employees can’t be required to pay for any of the cost of such items if, by so doing, their wages would be reduced below the required minimum wage or overtime compensation. This is true even if an economic loss that is suffered by the employer is due to an employee’s negligence.
Examples of How Employers May Violate the Law
The DOL gives these examples of the kind of violations that employers may make:
1. A cashier working for minimum wage is illegally required to reimburse his or her employer for a “cash drawer shortage.”
2. An employer improperly requires tipped employees to pay when customers walk out of a restaurant without paying their bills or for checks the employee incorrectly totaled.
3. An employer furnishes elaborate uniforms to minimum wage employees and illegally makes them responsible for paying to have the uniforms cleaned.
4. An employee driving his or her employer’s vehicle causes an accident, and the employer holds the employee responsible for the vehicle’s repairs, which illegally reduces the employee’s wages below minimum wage.
5. A security guard is required to purchase a gun for his or her job, and the cost causes him or her to improperly not earn minimum wage.
6. The cost of an employer-required physical examination illegally cuts into an employee’s minimum wage or overtime compensation.
If you have questions about deductions to your employees’ wages, consult with your payroll or HR advisor, or your employment attorney.