Everything You Need to Know About California Labor Code 221

Per California Labor Code 221, there are three exceptions for when an employer can lawfully withhold funds from their employees’ wages. Here’s everything you need to know about California Labor Code 221: deductions from wages.

It is legal for an employer to retain an amount of their employee’s wages when 1) required to do so by state or federal law, 2) the employee provides written consent for the deduction to cover their benefit plan contributions, insurance premiums, or additional reasons that do not result in a rebate of their wages, and 3) if the deduction covers health insurance or pension contributions, where both parties have either issued their approval in writing or have initiated a collective bargaining agreement.

A collective bargaining agreement is negotiated between a labor union and the employer, which outlines the terms and conditions both parties are to follow. These types of agreements may include provisions about wages, working hours, health insurance benefits, and/or vacation time.

Related: California Minimum Wage Laws: What You Need to Know

Limits on Deductions

An employer has the autonomy to deduct from their employee’s wages in the incidence of a money shortage, breakage, or loss of equipment that is explicitly regulated by the Industrial Welfare Commission Orders and Kerr’s Catering v. Department of Industrial Relations (1962). There are other court decisions that limit these requirements as well. For example, Barnhill v. Sanders (1981) bars an employer from repaying any balloon payments, which are considered larger-than-usual one-time payments, even if both parties authorized this payment in writing. Additionally, the decision in CSEA v. State of California (1988) deems it unlawful for an employer to deduct from an employee’s current payroll for previous salary advances if there was an error. Lastly, it was decided in Hudgins v. Neiman Marcus (1995) that deductions for unidentified returns from an employee’s commissions were unlawful.

When else can an employer not make a deduction?

An employer cannot take further deductions from their employee’s wages if:

  • The employer requires a bond of an applicant or an employee, the employer is responsible for paying the cost of the bond per Labor Code Section 401.
  • Employees are entitled to reimbursements from their employer for any necessary expenditures or losses incurred in order to do their job per Labor Code Section 2802. The employee should not have to cover any of these additional business expenses to carry out their work.
  • An employer cannot collect gratuities or take any given to the employee out of their wages per Labor Code Section 351.
  • Either an applicant or an employee requires a photograph to be taken of them, this expense cannot be taken from their wages, but rather covered by the employer per Labor Code Section 401.
  • An employer cannot withhold or deduct from wages of any employee in order to pay for pre-employment medical or physical examination taken as a condition of their employment, or if it is required by local, state, or federal law per Labor Code Section 222.5.
  • The employer requires that their employee wear a uniform, the employer must cover the cost of said uniform per Labor Code Section 2802, Section 9. In this context, a uniform is considered any apparel or accessories distinctive in color or design to the employee’s place of work.

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