The Final Paycheck – What You Can and Cannot Deduct

In my last blog we talked about the Termination Checklist and how it’s important to ensure there are no loose ends when an employee
terminates voluntarily or is fired.  It’s also important to know, when issuing the final paycheck, what you can and cannot deduct from it.

In California, an employer can only make deductions from an employee’s final paycheck that are:

• required under federal or California law, such as income taxes and social security tax
• authorized by the employee, such as premiums for a health or pension plan, or
• authorized by the terms of a collective bargaining agreement.

No other deductions are allowed. You may not deduct from an employee’s final check any amount still owed on a debt, even though the indebtedness is contained in a written agreement to pay the full amount of the debt on demand, at termination or otherwise.

Likewise, if you advanced an employee vacation and they quit or are terminated before the advanced vacation is earned back, you cannot deduct the amount from the employee’s final paycheck.

In both these cases you will have to pursue other avenues to recoup the amount owed.

Again, be sure that you issue the employee’s final check promptly. If the employee voluntarily terminates and gives at least 72 hours notice, you must issue the final paycheck on the employee’s last day of work. If you terminate an employee you must issue the final paycheck immediately upon termination.