Michigan Democratic Legislators are introducing legislation intended to curtail illegal deductions from pay.  Any illegal deduction from pay is being called wage theft. Wage theft is described as the “denial of wages or employee benefits that are rightfully owed to an employee.”

Common wage theft activity includes:

·        Improper reimbursement of tip money collected by the employer

·        Not recognizing work time toward payment of wages and overtime (e.g. employer simply not recording/counting service time worked)

·        Underpayment of agreed upon wage rate

·        Not paying at least the minimum wage

·        Misclassifying a job as exempt when it is really non-exempt and owed overtime on hours worked over 40 in a week

·        Misclassifying a worker as an independent contractor

·        Improperly executed (deductions that take wages below minimum wage) or illegal (trivial or fabricated reasons for) deductions from wages

The Economic Policy Institute in Washington DC estimates employees lose over $400 million due to illegal deductions from pay.

Though “wage theft” legislation is sold as a solution to intentional and illegal acts, in many cases employers simply do not understand the often confusing and complex wage and hour and payment of wages laws (both state and federal and sometimes local ordinances too) and make an honest mistake. Michigan’s proposed legislation would increase criminal and financial penalties for employers that violate the law. It also extends new protections against retaliation to employees that whistle blow a complaint of wage theft. The legislation would also provide for additional state resources toward enforcement and oversight.

One concern that employers should have about this legislation is how it may be used if a deduction from pay was done erroneously and unknowingly. Employers may be able to address this situation with their employees before a complaint to either Michigan Employment Standards or Federal (Department of Labor) Wage and Hour is made or a lawsuit is filed. Below is an employer policy that communicates how an employee can bring a potential wage deduction or wage calculation to the employer’s attention first. This policy is also recommended as “safe harbor” and affirmative defense against federal wage and hour complaints.

ADMINISTRATIVE PAY CORRECTIONS

The Company takes all reasonable steps to ensure that employees receive the correct amount of pay in each paycheck and that all employees are paid promptly on the scheduled payday.

Complaint Procedure:

Employees who believe they have not been paid properly should discuss and put their concern in writing with their immediate supervisor and Human Resources.

ABC Company encourages the prompt reporting of any pay discrepancy so that action can be taken to investigate and resolve the discrepancy, if it is found that a discrepancy exists. Any reported issues will be investigated by the employee’s supervisor, with the assistance and information from the Payroll Department, or any other parties involved in the payroll process. Confidentiality will be maintained throughout the investigation, and retaliation will be strictly prohibited.  At the conclusion of the investigation, a determination will be made as to whether or not a discrepancy with the employee’s pay exists.

If it is found that an error was made, the error will be corrected on the next payday, or sooner, depending upon applicable state law. If the employee does not agree with the resolution, they may submit a written appeal to the Company President.

In the unlikely event that there is an error in the amount of pay which has resulted in the employee receiving excess compensation, such adjustments shall be made in the next succeeding pay period and deducted from the next paycheck.

ASE members have access to accurate pay practice compliance information 24/7/365 in the online compliance library, CCH HRAnswersNow, which has a robust payment of wages section. Human Resource professionals and managers can keep up on compliance issues and the law in ASE’s many educational courses offered throughout the year. ASE members can also access expert consultants to conduct Fair Labor Standards Act exempt classification reviews.

Sources: Lawmakers propose plan to end “wage theft” Michigan Radio.org. 10/30/2017. Wikipedia article on Wage Theft