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Payroll Cashing Fee Is Unlawful Wage Deduction

Check your state’s wage and hour laws to make sure there are no similar prohibitions against charging employees cash-machine fees.

December 15, 2006
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Related Topics: Wages and Hours, Legal
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Employers that require their employees to cash their cash vouchers at the company’s dispensing machines and pay a processing fee may be violating state labor laws.

Labor Ready was accused of requiring employees to cash their vouchers at the company’s dispensing machines and pay a $1 processing fee. New York labor law prohibits employers from deducting money from the wages of an employee unless the deduction is required by law, is authorized in writing and is for the benefit of the employee.

Labor Ready argued that its employees voluntarily used the cash-dispensing machines and that the fees were not wage deductions, but merely separate voluntary transaction fees.

The New York Court of Appeals found against the employer. The vouchers Labor Ready gave its employees to cash had already deducted the $1 fee, and the voucher could only be negotiated at the company’s cash-dispensing machines. The employees never received any wages before the fee was charged. The fee and payment, therefore, did not constitute two separate transactions.

The court found that because Labor Ready was benefiting from the $17,800 in cash-dispensing machine deductions at its Buffalo branch in one year and $8.3 million in nationwide revenue from machine fees annually, the practice violated New York state labor law. Angello v. Labor Ready Inc., N.Y. Ct. App., No. 149 (November 6, 2006).

Impact: Check your state’s wage and hour laws to make sure there are no similar prohibitions against charging employees cash-machine fees.

Workforce Management, December 11, 2006, p. 16 --Subscribe Now!

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