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Aug 3, 201711:15 AMLaw at Work

with Jessica M. Kramer and Ashlie B. Johnson

Can I hold my departed employee’s paycheck if I believe she owes the company money?

(page 1 of 2)

We employers have all been there: an employee quits without notice and still possesses uniforms or equipment that belong to the company. Or worse, the employee is disgruntled and damages property of the company on her way out. It’s all right, I’ll just hold her last paycheck hostage until she returns the property or pays me for the damage. Right? Wrong. Well, in most cases wrong. There seems to be a common misconception that withholding a paycheck in a situation like this is a perfectly legal practice. Based on my experience and observations, it is a relatively common practice.

What employers may not know is that there is a specific law in Wisconsin restricting an employer’s ability to withhold paychecks (or even make deductions before remitting a paycheck). Often referred to as the “faulty workmanship law,” section 103.455 of the Wisconsin Statutes reads, in relevant part, as follows:

Deductions for faulty workmanship, loss, theft or damage. No employer may make any deduction from the wages due or earned by any employee, who is not an independent contractor, for defective or faulty workmanship, lost or stolen property, or damage to property, unless the employee authorizes the employer in writing to make that deduction or unless the employer and a representative designated by the employee determine that the defective or faulty workmanship, loss, theft, or damage is due to the employee's negligence, carelessness, or willful and intentional conduct, or unless the employee is found guilty or held liable in a court of competent jurisdiction by reason of that negligence, carelessness, or willful and intentional conduct. If any deduction is made or credit taken by any employer that is not in accordance with this section, the employer shall be liable for twice the amount of the deduction or credit taken in a civil action brought by the employee. Any agreement entered into between an employer and employee that is contrary to this section shall be void.

Let’s break it down. For what sorts of things can you not make deductions from an employee’s paycheck?

  1. Defective or faulty workmanship — This could include a subpar product that was made by an employee and has to be scrapped, costing the employer money. It could also include a refund or discount the employer had to give to a customer due to mishandling of the project by the employee. Anything that you attribute to the employee’s conduct, whether it was intentional, negligent, reckless, careless, or just an honest mistake, cannot be a basis for keeping money out of an employee’s paycheck.
  2. Lost or stolen property — This is pretty self-explanatory, and covers the kept uniform example given above, as well as straight up theft of any item that is the property of the company, including money. You fire an employee for dipping his hand in the till? You may be entitled to a repayment of that money, but not by taking it out of his paycheck. Consider a civil action, or a referral to law enforcement, which may prosecute the matter criminally, allowing you to restitution as a victim of the crime.
  3. Damage to property — This covers any damage to property of the employer that you believe was caused by, or is the responsibility of, the employee. Similar to the situation of theft, you can consider civil or criminal procedures for recovering any sums you believe the employee owes you.


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About This Blog

Jessica M. Kramer is a partner at Kramer, Elkins & Watt LLC in Madison and writes about employment law. At KEW she handles employment law matters for businesses and individuals, and represents landlords in all aspects of landlord-tenant law. Jessica received her undergraduate degree from UW–Madison in 2000 and her Juris Doctor from the UW Law School in 2004.

 Ashlie B. Johnson, PHR, is the owner of Brooke Human Resource Solutions, serving the Dane County area. BrookeHR operates as an independent HR contracting resource for small businesses, providing a wide range of support as well as policy language, documentation, and employment agreements that meet today’s complex compliance standards. Ashlie received her B.S. in Human Resource Management from St. Cloud State University in 2002 and has been a certified PHR since 2007.



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