What may an Employer Lawfully Deduct from an Employee’s Final Paycheck?

Deduct from Final Paycheck Advance or Employee Loan

Various provisions of the California Labor Code prohibit employers from withholding wages to which an employee is entitled.  For example, Cal. Lab. Code § 212 prohibits employers from discounting amounts owed to employees and Lab. Code § 216 prohibits a person who has the ability to pay from willfully refusing to pay wages owed to an employee. Moreover, Lab. Code § 225.5 provides a civil sanction in the form of penalties for violation of these sections, intentionally or unintentionally.

Any employee advances upon which the employer will seek repayment must be authorized in writing directing the employer to authorize only the amounts authorized for each pay period.  The Division of Labor Standards Enforcement will not permit a “balloon payment” to be recovered from a final check, even if specifically authorized by the employee.

However, the DLSE may recognize an exception to the principle if the employee enters into a new, valid agreement at or before the termination that expressly authorizes the deduction of the full balance owed from the final paycheck.