Labor; The Uniform Wage Payment Law; Effect upon deductions from pay

Subject:

Labor; The Uniform Wage Payment Law; Effect upon deductions from pay.

Requested By:

The Honorable J. Taylor McMillan Deputy Commissioner of Labor

Mr. W. James Easterly, Director State Employment Standards Division

N.C. Department of Labor

Questions:

(1)

Is a deduction from wages for a cash or merchandise shortage a violation of the Uniform Wage Payment Law?

(2)

Does a formula for wage payment including deductions of shortages, in any form, comply with the Uniform Wage Payment Law?

Conclusions:

(1)

Yes.

(2)

No.

This Office has previously held that any deduction from an employee’s wages for cash and merchandise shortages which has the effect of reducing his rate of compensation below that prescribed by G.S. 95-87 is a violation of the Minimum Wage Law. 43 N.C.A.G. 332 (1974). You now ask if an employer’s practice of deducting cash and merchandise shortages from the wages of an employee is a violation of the Uniform Wage Payment Law, G.S. 95-161, et seq.

The Uniform Wage Payment Law became effective on January 1, 1976. It requires an employer to pay his employees on a timely and regular basis and prohibits any withholding of wages, except as expressly permitted.

G.S. 95-166 deals with the withholding of wages. It provides, in pertinent part:

"No employer may withhold or divert any portion of an employee’s wages unless:

(2) the employer has a written authorization from the employee for deductions of a lawful purpose accruing to the benefit of the employee as provided in regulations issued by the Commissioner." (Emphasis added)

The language of this section is clear and unambiguous. An employer may not withhold any wages of his employee unless he has written authorization and unless it accrues to the benefit of the employee. The withholding of wages by an employer to account for cash register or merchandise shortages clearly does not accrue to the benefit of the employee. This is expressly recognized in the regulations of the Commissioner adopted pursuant to the directions of G.S. 95-166(2):

"No employer may withhold cash register or inventory shortages or other losses or damages to property or delinquent checks which an employee has endorsed." 13 NCAC 9C.0304(b)

That it was the intention of the General Assembly in enacting the Uniform Wage Payment Law to prohibit employers from withholding the wages of an employee to account for cash register or merchandise shortages is confirmed by reference to G.S. 95-163. This section requires than an employer pay his employees "on or before the current pay day all the wages and tips accruing to said employee." It is then stated:

"The employer shall not withhold any wages and tips as security for the performance of assigned tasks."

We note that the prohibition against an employer withholding wages of his employees to account for cash register or merchandise shortages may not be circumvented by means of a private agreement between the employer and the employee. G.S. 95-168 specifically provides that "no provision of this Article may in any way be contravened or set aside by private agreement."

A second problem has been presented in the form of employer wage payment schemes attempting to penalize employees for cash or inventory shortages while giving the appearance of compliance with the law.

For example, payment of a "bonus" for not having cash or inventory shortages has the same effect as deducting the shortage from the employee’s wages.

G.S. 95-161(f) states:

"(f) the term "wages’ means compensation for labor or services rendered by an employee, whether the amount is determined on a time, task, piece, commission, or other basis of calculation." (Emphasis supplied)

This statute makes it clear that the General Assembly intended that the Uniform Wage Payment Law apply to all wages, without regard to the method of computation.

In our opinion, any method of computing wages which results in a disparity between wages paid for comparable work due to a formula including cash or inventory shortages would constitute a violation of the Uniform Wage Payment Law of North Carolina.

Rufus L. Edmisten Attorney General

George W. Lennon Associate Attorney General