Last month, the Massachusetts Supreme Court ruled in Camara v. Attorney General, 2011 Mass. LEXIS 16 (Mass. Jan. 25, 2011), that employers are prohibited from docking the pay of workers as punishment for causing a “preventable accident.” In reaching this decision, the Court disregarded the fact that the employees in question were only docked a “modest” amount, and that they had signed a written policy agreeing to the deduction. Instead, the Court focused on the language and the alleged purpose of the Massachusetts’ Payment of Wages Law, which states that employers are prohibited from withholding earned wages.

Docking an employee’s pay for loss or destruction of company property is a fairly common practice among employers. However, as highlighted in Camara, this practice violates the law in a number of states, including, but not limited to, California, Connecticut, Iowa, Massachusetts, Minnesota, New Jersey, and New York. These states have laws specifically prohibiting deductions from employees’ wages in the event of cash shortages, loss of equipment, misconduct, the destruction of company property, and various other occurrences. These restrictions apply to all employees regardless of whether they are classified as exempt or non-exempt.

Additionally, docking an individual’s pay can result in the loss of an employee’s exempt status. The United States Department of Labor (“DOL”) issued an opinion letter in 2006 stating that “any employer policy that requires deductions from the salaries of its exempt employees to pay for the costs of lost or damaged tools or equipment” constitutes an “improper deduction,” thereby invalidating the exempt status of any affected employee. The DOL made clear that employee consent to such a deduction has no bearing on whether the deduction is proper.

In light of these concerns, and as strange as it may sound, employers are best served by maintaining a policy of disciplining, rather than docking, employees who are responsible for loss, damage, or destruction of company property.