As hardworking Americans await their stimulus payments, corporations are already devising ways to take their workers’ money.
On March 27, 2020, President Donald Trump signed into law a $2 trillion stimulus package meant to help ease the economic blow caused by COVID-19. Under the law, qualifying individuals will receive up to $1,200 ($2,400 for married couples), with an additional $500 for each child under 16. Individuals qualify according to their adjusted gross income (AGI) from their 2019 federal tax filing, or their 2018 filing if they have not yet filed. Individuals with AGIs under $75,000 (or $150,000 for joint filers) will receive the full amount. Payment amounts gradually decrease for higher AGIs with individuals making over $99,000 (or $198,000 for joint filers), phased out of the program.[1] The IRS is expected to begin sending out payments in late April.[2]
While the checks are not yet in the mail, some employers are already thinking of ways to use them to reduce their payroll obligations. For example, one local news reports that an unidentified company in Texas may be requiring workers to sign agreements that authorize the employer to deduct from wages an amount equal to the workers’ stimulus checks, [3] essentially taking the government payment out of the hands of the individuals and putting it into the hands of the company.
No doubt more companies across the country are thinking of creative ways to take advantage of their workers’ aide. These schemes may run afoul of state or federal laws.
The federal Fair Labor Standards Act (FLSA), for example, establishes standards for minimum wages and overtime pay. The FLSA requires employers of covered employees who are not otherwise exempt to pay these employees a minimum wage of not less than $7.25 an hour and to pay 1.5 times their regular rate of pay for all hours worked over 40 in a workweek.[4] The FLSA permits wage deductions for work-related expenditures, but not if those deductions cause payments to fall below the minimum wage. If an employer deducts stimulus amounts from an employee’s wages, it may be violating federal law.
Many states also have their own minimum wage and overtime requirements that typically afford greater protections to workers than federal law and in greater amounts. Some also have other law, generally referred to as wage payment statutes, that entitle workers to payment of earned wages above and beyond the minimum wage rate. For example, under Minnesota Law, an employee who has an agreement to receive $20.00 per hour is entitled to timely receive those wages.[5] A deduction for stimulation amount that zeros out or substantially reduces a paycheck may also violate these laws.
Some states, including Minnesota and California, also have laws that specifically prohibit unauthorized deductions from paychecks.
The Minnesota Payment of Wages Act substantially limits the kinds of payroll deductions to which employees may consent.[6] Employers cannot deduct paychecks for things like lost or stolen property, property damage, or to recover any claimed indebtedness. Paycheck deductions may be made for things like paying union dues, insurance payments, and certain savings plans.
Similarly in California, an employer may only withhold amounts from an employee’s wages only when required or empowered to do so by state or federal law. Deductions under these narrow circumstances may be made for things like insurance premiums and benefit plan contributions, but first employers must obtain employees’ written authorization or must be made pursuant to a collective bargaining agreement.[7] These laws would also likely be implicated in an employer’s scheme designed to pay workers less wages in congruence with their stimulus relief. Workers should learn their rights in case their employer is scheming to take their stimulus payment. The rules may vary depending on your state, employer size, and your job duties.
If you have believe your employer is planning to deny you of these rights or otherwise taken wrongful actions towards you related to your stimulus payment, please contact us at intake@nka.com or by phone at (877) 344-4628. We remain dedicated to protecting and advancing the rights of employees and consumers.
This article is meant to be informative, and is not legal advice. Please note that state, federal, and local laws and regulations will continue to evolve as this pandemic continues. If you have questions, Nichols Kaster strongly suggests you consult an attorney.
[1] Coronavirus Aid, Relief, and Economic Security Act (CARES Act) Pub. L. No. 116-136 (H.R. 748).
[2] Shane Croucher, “When are Stimulus Checks Coming from the IRS? Deposit Date and Details Explained” Newsweek (Apr. 6, 2020).
[3] Jody Barr, “Austin Company Looking to Dock Paychecks for those Receiving Stimulus Checks,” KXAN (posted Mar. 27, 2020, updated Mar. 30, 2020).
[4] For more information on minimum wage and overtime requirements, see Nichol’s Kaster’s practice pages on Wage and Hour Violations.
[5] See Minn. Stat. § 181.101, et seq.
[6] See § 181.79, eq seq.
[7] See Cal. Labor Law § 221, et seq.
