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Thread: Legality of deductions for "mistakes" from paychecks

  1. #1
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    Default Legality of deductions for "mistakes" from paychecks

    Here's the basics (posting for a friend): Friend works for a company in Washington State that sells/installs a line of custom products for homes (think cabinetry). She's paid 100% commission, and is clearly an "outside sales" person (appears to meet all the "tests"). She also gets bonuses based on various factors (one bonus based on sales numbers, another bonus based on accuracy, customer service/etc). So you get paid "A" dollars on a regular basis which is your commission. Once/quarter you also get some additional percent of your "A" dollars for the quarter in the form of "B" bonus. End of year you get "C" dollars (flat fee of $500, $1000, etc.) if you were really good at various things.

    A couple of months ago (my friend started at this place 4 years ago) they instituted a policy (via a new "agreement" with the sales people) that they will deduct money from all the outside sales people's pay checks when they make mistakes (e.g. mis-measurements, failure to include a part on the list, etc.) or incur a customer "go-back" (e.g. customer not quite happy, disagrees the result is what they agreed to, etc.). To be clear, this is reducing her "A" dollars - her regular commission, since she has no base salary.

    Their rationale, of course, is that the company incurs additional labor or materials costs to fix these mistakes, and they are simply passing that along to the employee and that sales person shouldn't have made the "mistake" to begin with. Of course with custom products it's nearly impossible to be 100% accurate all the time, but that's neither here nor there.

    Based on my reading of the applicable WACs, this is illegal. There are some exceptions with what companies can deduct from a final paycheck - that is once you fire someone, you can, for example, deduct a till shortage incurred during that final pay period from their last pay check (but still you can't deduct any accumulated/previous amounts). But while the person is employed, you simply can't deduct most costs from someone's paycheck, especially due to loss/damage/mistakes.

    Here are two links where I'm getting some of my info from:

    http://www.lni.wa.gov/WorkplaceRight...ct/default.asp
    http://www.lni.wa.gov/WorkplaceRight...96-126-028.asp

    The example that comes to mind is that if you break glasses, the employer can't charge the glasses to you.

    I'm trying to help my friend figure out if this is merely a ****ty thing to do, or illegal and to pursue an L&I claim/investigation.

    I'm also thinking the law prevents employers from simply claiming the employee signed an agreement so they (the employer) can do what they want. This also based on my understanding that there are many rights you cannot sign away, no matter what the "agreement" says.

    Thoughts? Am I wrong? Missing something?
    Last edited by jcricket; 07-11-2008 at 12:53 PM. Reason: Added clarification about state & which part of paycheck

  2. #2
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    Question

    Any advice from the experts here? My friend contacted the WA State L&I department. Their representative said this is an illegal deduction - it's simply prohibited. The employer could eliminate a bonus or fire people for making mistakes, but they can't deduct from regular wages (even if it's commission) for "the cost of doing business". But you never know how thoroughly that person read the initial question.

    I tried to help by searching this forum and google, but I couldn't find cases in WA state. In CA the courts recently ruled that a company can charge back "advanced commissions" - like if you get the commission when the job is booked, but the customer later backs out of the contract, your company can get the commission back from you as long as the company doesn't keep a deposit or anything. See: http://classactiondefense.jmbm.com/2...caseskoeh.html

    The closest I could find was a case that was decided last month in New York where brokerage firms are allowed to deduct for "mistakes" made by employees, although it's still being appealed. See: http://www.investmentnews.com/apps/p.../REG/246810690

    My friend doesn't want to launch a wage investigation unless there's good reason to believe this type of chargeback/deduction is illegal. If it's just an unfortunate change in her compensation (one of many ways the employer seems determined to tick off their long-time and best salespeople) then she'll just use it in her decision of whether or not to seek other employment.

  3. #3
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    Default

    Sounds like she has her answer from the state directly. What may or may not be allowed in other states is irrelevant.

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