Wage deductions, or a monetary deduction from an employee’s paycheck, are sometimes unavoidable in the modern workplace. As employers and employees work to resolve certain financial obligations in a manner that is fair to each party, it’s imperative that employers in Colorado be aware of the laws and regulations surrounding wage deductions on both the federal and state level. According to the Fair Labor Standards Act (FLSA), employees must still receive at least minimum wage after all wage deductions are applied. Other federal laws and regulations, such as the Consumer Credit Protection Act (CCPA), put additional requirements on wage garnishments related to personal debt and consumer credit.
Both federal and state law allow for standard wage deductions, which include but are not limited to deductions for taxes, social security, FICA requirements, Medicare, garnishments, or any other court-ordered deductions. Voluntary and revocable deductions permitted under Colorado law include deductions for insurance benefits, union dues, savings plans, stock purchases, voluntary pension plans, charities, and deposits to financial institutions, although employees must agree to these voluntary deductions in writing before the deductions occur. Other voluntary wage deductions that are considered lawful in Colorado include repayment of loans, pay advances, and compensation for goods, services, equipment or other property. All voluntary deductions must be governed by written agreements between the employer and employee.
In Colorado, an employer may under certain circumstances, deduct from an employee’s wages to cover the cost of a shortage due to theft by the employee. Before doing so, however, an employer must file a police report detailing the alleged theft. If an employee is not charged within 90 days of this filing, is found not guilty in a court of law or if the charges are dismissed, the employee is allowed to recover the amount withheld plus interest. It is important to note that if an employer is found to have utilized this wage deduction in bad faith, they can be held liable for three times the amount wrongfully withheld plus attorney’s fees, court costs, and other costs deemed reasonably by the court.
Colorado employers may also utilize wage deductions to recover the value of property that an employee was entrusted with during the course of their employment, but failed to return upon termination. According to the Colorado Department of Labor and Employment, “the employer shall have 10 calendar days after the termination of employment to audit and adjust the accounts and property value of any items entrusted to the employee before the employee’s wages or compensation shall be paid.”
Finally, employers in Colorado may not charge an employee for a customized uniform, includes utilizing wage deductions as a method of payment. Employers are allowed to require a deposit of up to 50% of the uniform cost and the deposit must be returned to the employee upon return of the uniform. Colorado employers may utilize a wage deduction to cover this deposit, but only if a written agreement exists, signed by both employee and employer, prior to the deduction.
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