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Iowa Wage Law

Karen Pfab, Iowa Workforce Development

Iowa Wage Law:Deductions

First, the Easy Ones

Deductions are permissible when “required by law or order”.• Federal withholding• State withholding• Medicare• Old Age Survivor Disability• Child Support garnishment• Garnishments in general

The General Rule• for educational classes

that could lead to a degree that is not necessary for the employee to perform current duties

• a training course instituted for the bona fide purpose of preparing for advancement through upgrading the employee to a higher skill, and not intended to make the employee more efficient in the employee’s present job

Written Authorization + Benefit for Employee• health and life insurance• pensions• savings• repayment of loans and

credit purchases• deductions for charitable

causes chosen by the employee

• flexible spending accounts

The ExceptionsProperty Damage Scenarios:• A member of your wait staff drops a tray of dishes. He’s

been klutzy before.• Your employee cracks the bumper of a company vehicle on

a telephone pole when backing out of a customer driveway.

• Your employee says “Computer crash? I’ll show you a computer crash!” and proceeds to slam your monitor on the floor.

The test: Whether the damage was “attributable to the employee’s willful or intentional disregard of the employer’s interests”.

The ExceptionsMoney Shortage Scenarios :• Customer’s check bounces Rule: Permissible deduction if it is “for the employee’s acceptance of checks that were dishonored due to the employee abusing discretion to accept or reject such checks”.• Gas station “drive off”Rule: Permissible only “when attributable to the employee’s willful or intentional disregard of the employer’s interests”.

The ExceptionsMoney Shortage Scenarios:• “Till” is short at end of shift

Rule: A deduction for a short till is only permissible if it “occurs within forty-five days prior to the most recent regular payday when a full-time manager-employee has agreed in writing that the manager-employee will be responsible for such a cash shortage”. There can only be one such agreement per business.

The ExceptionsLost or Stolen Property Scenarios:• You keep tools in a shed. One of them is missing

just after your employee quits.• You assign a tool to an employee. As you give it

to them they sign a document that states they received that tool and are responsible for returning it.

Permissible deduction if “the property has been assigned to and receipt acknowledged by the employee”.

Special ProblemsUniform scenarios:• Supplying a shirt with a company logo• Supplying khakis and polo shirtRule: The deduction is for “clothing or footwear which may be used by an employee during nonworking hours and is not personal protective equipment”.Overpayment scenario:• Employee always gets a check for $2,000.00. Due

to clerical error, the next check is for $3,000.00.Rule: An employer may deduct for a clear error.

Key Question #1What is “for the benefit of the employee”?Answer: Think of “benefits”, or whatever an employee would consider a perk of employment.

Key Question # 2Do a deduction or consider employee discipline?• A waitress drops a tray for the third time this month. She

says “I feel so bad…take it out of my next paycheck”.• A driver leaves trash in the company vehicle and a coffee

stain on its carpet. Disgusted, you pay to have it detailed.• An auto body worker does a poor job. Another employee

has to re-do the job.• A employee tells a customer “Just send us a check some

time this week”. You have a policy that requires immediate payment. The customer doesn’t pay.

Answer: Deduction only for the nonpayment.

Iowa Wage Law:“Popular

Problems”

TrainingScenario: You require all employees to attend a training. You pay the cost of the training and provide a free lunch.General rule: “Time spent in attending training required by an employer is normally considered compensable hours of work”.Detailed rule: Attendance at lectures, meetings, training programs and similar activities need not be counted as working time if the following four criteria are met: (a) attendance is outside of the employee's regular working hours; (b) attendance is in fact voluntary; (c) the course, lecture, or meeting is not directly related to the employee's job; and (d) the employee does not perform any productive work during such attendance.

Final PaymentWhat we see and hear:“They have to pay me right away”.Employer requiring paperwork to be signed or property to be returned prior to giving the last pay check.The rule: The employer shall pay all wages earned, less any lawful deductions specified in section 91A.5 by the employee up to the time of the suspension or termination not later than the next regular payday…” There is an exception for “draw against commission” arrangements.

Claims for Payout of Vacation/PTO

Scenario: Employee quits or is terminated. Employee files a wage claim for the value of vacation/PTO.Problem: No written policy on what happens with vacation/PTO at the end of employment.

Solution: A written policy. Will you always pay out at the end of the employment? Will you pay out only if you get a two-week notice? Will you pay unless the employee is fired for cause? “If vacations are due an employee under an agreement with the employer or a policy of the employer establishing pro rata vacation accrued, the increment shall be in proportion to the fraction of the year which the employee was actually employed”.

Appendix - Deductions1. An employer must establish the validity of any deduction by proving: a. the deduction is required or permitted by state law;b. the deduction is required or permitted by federal law;c. the deduction is required by order of a court of competent jurisdiction;d. the deduction is for a cash shortage which occurs within forty-five days prior to the most recent regular payday when a full-time manager-employee has agreed in writing that the manager-employee will be responsible for such a cash shortage;e. the deduction is for the employee’s acceptance of checks that were dishonored due to the employee abusing discretion to accept or reject such checks;

Appendix - Deductionsf. the deduction is for breakage, property damage, default of customer credit, or nonpayment for goods or services rendered when attributable to the employee’s willful or intentional disregard of the employer’s interests;g. the deduction is for lost or stolen property when the property has been assigned to and receipt acknowledged by the employee;h. the deduction is for gratuities received by an employee;i. the deduction is for clothing or footwear which may be used by an employee during nonworking hours and is not personal protective equipment;j. the deduction is for an employee’s relocation to the place of employment is no more than twenty dollars, and the employer is not the State, an agency thereof or a subdivision thereof and employs one hundred or more employees paid on an hourly basis

Appendix - Deductions2.   An employer may also establish the validity of a deduction by proving that the deduction is authorized by the employee in writing, is otherwise lawful, and that such an arrangement is for the benefit of the employee.a. The following are examples of deductions for the benefit of the employee:(1) deductions for health benefits;(2) deductions for cafeteria plans;(3) deductions for pensions;(4) deductions for savings;

Appendix - Deductions(5) deductions for repayment of loans and credit purchases;(6) deductions for charitable causes chosen by the employee;(7) deductions for educational classes that could lead to a degree that is not necessary for the employee to perform current duties; and(8) deductions for a training course instituted for the bona fide purpose of preparing for advancement through upgrading the employee to a higher skill, and not intended to make the employee more efficient in the employee’s present job.

Appendix - Deductionsb. The following are examples of deductions not for the benefit of the employee:(1) deductions for uniforms featuring a company logo or advertising;(2) deductions for accident insurance deductibles;(3) deductions for negligent equipment damage;(4) deductions for orientation or training;