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North Carolina Limits Ability to Deduct From Paychecks Without Offering Employee Chance to Rescind Authorization

    Client Alerts
  • August 20, 2010

The Society for Human Resources Management's website recently reported a strong increase in the number of state law wage payment lawsuits across the U.S. In North Carolina, a number of these suits have involved claims by employees that their employers improperly deducted amounts from their paychecks.

In North Carolina, as in most states, employers cannot make deductions from employee pay other than those deductions required by law (i.e., taxes) without receiving advance written authorization from the employee. However, there are two different kinds of authorization recognized in the state Wage and Hour Act.

First, if the employee provides authorization for deduction of a specified amount (i.e., United Way contributions per pay period), that authorization remains in effect until the employee provides notice of withdrawal. In the event that the exact amount to be deducted is not specified in the written authorization (for example, in the case of a general authorization to deduct for damaged or missing uniforms), however, different rules apply.

At the point in time when the employer decides to make the deduction, it must notify the employee of the exact amount to be deducted in advance, and provide the employee with a reasonable opportunity to withdraw their authorization before the deduction is made. If authorization is withdrawn, the employer cannot use the employee's pay to satisfy the obligation, and may be forced to sue the employee.

Limited exceptions to this rule apply for deductions based on employer payroll error, or reimbursement for advances on wages. Violations of this North Carolina law can result in awards of double the improperly deducted wages, plus attorneys fees and costs. Employers should review their payroll practices to assure compliance with wage payment laws in the states where they operate.