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California Labor Code Section 221: Permissible Paycheck Deductions in 2024

Labor Code § 221 in California prohibits employers from retracting wages that have already been disbursed to an employee. Such deductions are considered unlawful, and employers can be subject to civil penalties or even criminal charges for implementing them. However, there are specific exceptions to Labor Code 221 that allow for deductions related to expenses such as health insurance.
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C.L. Mike Schmidt Published by C.L. Mike Schmidt

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California Labor Code Section 221: Permissible Paycheck Deductions

Most employees have various deductions from their paychecks, which typically include:

  • State and federal taxes.
  • Health insurance premiums.
  • Union dues.
  • Pension plan deductions.

According to California Labor Code section 221 [1], It shall be unlawful for any employer to collect or receive from an employee any part of wages theretofore paid by said employer to said employee.

This prohibition extends to accidental wage overpayments. Section 221 explicitly states that it is illegal for an employer to reclaim any portion of wages already paid to an employee.

Here are a few examples of deductions that employers are not allowed to make from an employee's earnings:

  • The cost of accidentally broken or damaged equipment
  • Wage overpayments from a previous pay period
  • The cost of a uniform is required by the employer
  • An accidental cash shortage

Exceptions to Labor Code 221

Employers are permitted to withhold amounts from an employee's wages under specific circumstances:

  • (1) when required or authorized by state or federal law,
  • (2) when the employee provides written authorization for deductions such as insurance premiums or benefit plan contributions, or
  • (3) when deductions for health, welfare, or pension contributions are allowed by a wage or collective bargaining agreement. Labor Code Sections 221 and 224 outline these provisions

As stated by the DIR - wage garnishment is a lawful deduction from wages under Labor Code section 224, an employer cannot discharge an employee because a garnishment of wages has been threatened or if the employee's wages have been subjected to a garnishment for the payment of one judgment [2].

Also Read: Employee Rights in California

Common Illegal Payroll Deductions

Some common examples of payroll deductions that are not allowed by employers include:

  • Gratuities: Employers cannot take any part of a gratuity left for an employee or deduct any amount from an employee's wages because of a gratuity. However, restaurants may have policies allowing for tip pooling among employees who provide direct table service
  • Photographs: If an employer requires a photograph of an applicant or employee, the employer must cover the cost.
  • Bonds: If an employer requires a bond from an applicant or employee, the employer must pay for it
  • Uniforms: If an employer mandates that an employee wear a uniform, the employer must cover the cost. The term "uniform" includes distinctive apparel and accessories
  • Business Expenses: Employers are required to reimburse employees for all expenses or losses incurred as a direct consequence of their work duties
  • According to Schneider Wallace from SWCK, employers cannot withhold or deduct wages to cover the cost of pre-employment medical or physical examinations, nor can they require employees to pay for such examinations mandated by law [3]

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References:

1. https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=LAB&sectionNum=221
2. https://www.dir.ca.gov/dlse/faq_deductions.htm
3. https://www.schneiderwallace.com/practice-areas/failure-to-pay-wages-overtime-commissions/deductions/