Many multi-state employers enact policies that provide that an employee driver is liable for wage deductions for damage caused to his or her company vehicle if it was caused by employee negligence or third party acts while in the employee's possession. This practice is illegal in many states, including California.
In California, employers are prohibited from taking deductions from an employee's wages for damages caused by simply negligence. California law provides that losses caused by an employee's negligence are a normal cost of doing business and must be borne by the employer. The California Division of Labor Standards Enforcement has held that an employer cannot take deductions to compensate for damage caused by an employee's negligence unless they were caused by a dishonest or willful act of the employee, or by an employee's "gross negligence." Gross negligence is defined as conduct that is "aggravated, reckless, and flagrant" with a state of mind "that exercises so slight a degree of care as to exhibit a conscious indifference or 'I don't care attitude' concerning the ultimate consequences of (one's) actions."
It is "a very rare action which will be found to be grossly negligent" and simple motor vehicle accidents will not meet the burden. An employer who makes a deduction while claiming gross negligence does so at great risk, because if the employee is found not to be guilty of gross negligence, the employee is entitled to recover not only his or her wages withheld, but also penalties of up to 30 days pay for the employer's failure to pay wages "without reduction or abatement."
The ability of an employer to deduct amounts from an employee’s wages due to a cash shortage, breakage, or loss of equipment is specifically regulated by the Industrial Welfare Commission Orders and limited by court decisions. (Kerr’s Catering v. Department of Industrial Relations (1962) 57 Cal.2d 319).In addition, there have been several court decisions that significantly restrict an employer’s ability to take an offset against an employee’s wages. Barnhill v. Sanders (1981) 125 Cal.App.3d 1, (Balloon payment on separation of employment to repay employee’s debt to employer is an unlawful deduction even where the employee authorized such payment in writing); CSEA v. State of California (1988) 198 Cal.App.3d 374 (Unlawful to deduct from current payroll for past salary advances that were in error); Hudgins v. Nieman Marcus (1995) 34 Cal.App.4th 1109 (Deductions for unidentified returns from commission sales unlawful.)
Some other common payroll deductions often made by employers that are unlawful include:
a. Gratuities. An employer cannot collect, take, or receive any gratuity or part thereof given or left for an employee, or deduct any amount from wages due an employee on account of a gratuity given or left for an employee. Labor Code Section 351 However, a restaurant may have a policy allowing for tip pooling/sharing among employees who provide direct table service to customers.
b. Photographs. If an employer requires a photograph of an applicant or employee, the employer must pay the cost of the photograph. Labor Code Section 401
c. Bond. If an employer requires a bond of an applicant or employee, the employer must pay the cost of the bond. Labor Code Section 401
d. Uniforms. If an employer requires that an employee wear a uniform, the employer must pay the cost of the uniform. Labor Code Section 2802,
e. Business Expenses. An employee is entitled to be reimbursed by his or her employer for all expenses or losses incurred in the direct consequence of the discharge of the employee’s work duties. Labor Code Section 2802
f. Medical or Physical Examinations. An employer may not withhold or deduct from the wages of any employee or require any prospective employee or applicant for employment to pay for any pre-employment medical or physical examination taken as a condition of employment, nor may an employer withhold or deduct from the wages of any employee, or require any employee to pay for any medical or physical examination required by any federal or state law or regulation, or local ordinance. Labor Code Section 222.5