What Can I Deduct From My Employees’ Paychecks?

Impermissible Deductions

There is a bright line rule that all employers can follow in New Jersey. That is: employers cannot “withhold or divert”(i.e., deduct) any portion of an employee’s wages from the paycheck unless expressly permitted. As a practical matter, that means if you do not see the deduction you want to make in the section below on Permissible Deductions, you cannot make the deduction from the paycheck.

Separate from the financial penalties, an employer who knowingly and willfully makes impermissible deductions from wages is guilty of a disorderly person’s offense which, if convicted, is subject to a fine of not less than $100 nor more than $1,000.

Making impermissible deductions from wages can result in the employer as well as the officers or agents of the entity having management of the employer (i.e., personal liability). Where the New Jersey Department of Labor & Workforce Development (“DOL”) Commissioner investigates violations, he has the power to not only compel payment to the Commissioner of the unlawfully deducted wages, but to charge an administrative fee of at least 10% and as much as 25% of the amount of unlawfully deducted wages. And on top of that, the DOL can assess an administrative penalty of $25 to $500 for each violation. Separate from the financial penalties, an employer who knowingly and willfully makes impermissible deductions from wages is guilty of a disorderly person’s offense which, if convicted, is subject to a fine of not less than $100 nor more than $1,000. Further, each impermissible deduction is a separate and distinct offense. So, if you are making an unlawful deduction from 100 employees’ paychecks, the money you will owe = A LOT.