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Ask the Hotline | Make Employee Pay for Lost Check?

July 29, 2018
Question 
 
One of our employees lost his weekly live paycheck. He asked us to issue him a new one, but our bank told us it would charge us a $35 fee for issuing a “stop payment” on the original check. This employee is one of a few who still gets a live pay check. It is the first time it has happened with this employee. May we charge the employee the $35 stop payment fee? Should we?
 
Answer
 
The Massachusetts Supreme Judicial Court (SJC) ruled in the 2011 Camara case that an employer could only make deductions from an employee’s paycheck where “there exists a clear and established debt owed to the employer by the employee.” Most employers and attorneys understand the case to mean that there should be something in writing that makes it clear to the employee that the employer may deduct money from an employee’s paycheck if a specified event occurs.  
 
The Camara case recognized the following examples of permissible deductions:
  • Proof of an undisputed loan or wage advance from the employer to the employee; 
  • A theft of the employer's property by the employee, as established in an "independent and unbiased proceeding" with due-process protections for the employee; 
  • The employer has obtained a judgment against the employee for the value of the employer's property; or
  • Language in a union contract showing that the parties have voluntarily agreed to a set of appropriately independent procedures for determining the existence and amount of the debt or obligation owed by the employee to the employer.
 
The court may authorize other pay set-offs on a case-by-case basis in the future. 
 
Given the prevalence of direct deposit, employers may not have a written provision in place governing a valid pay set-off such as this.
 
Assuming that you do not have anything in writing, your choice is to issue the new paycheck and ask the employee to pay you the fee you received from the bank and over which you had no control, or absorb the fee this time but then inform the employee in writing on a document the employee signs (showing his clear understanding of the issue) that if it ever happens again, you will deduct the stop-payment fee from the paycheck. 
 
Keep in mind that any pay set-off may not take an employee’s pay below the minimum wage for the hours worked that week. If an employee earns the minimum wage or slightly above, make sure the fee does not reduce the employee’s pay below $11 an hour. 
 
Direct-Deposit Option
 
Consider this a perfect opportunity to urge this employee to sign up for direct deposit.
 
The Massachusetts Fair Labor Division concludes that the Electronic Fund Transfer Act does not prevent an employer from requiring its employees to participate in the company’s direct-deposit program.
 
The employee must be allowed to choose the bank, and participation in the program must not cost the employee anything. That means an employer may not require participation in a direct-deposit program if the employee is forced to open a bank account that he or she does not want and incur fees associated with that account. The employer must pay for the establishment and maintenance the account.
 
Please contact the AIM Employer Hotline at 800-470-6277 if you have questions about this or any other HR-related matter. 
 
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