A client called to say that an employee failed to return a company-owned laptop. The employer wanted to deduct the cost of the laptop from the employee's next paycheck and asked if that approach was legal. While you might think the answer is a no-brainer "yes," a deduction from an employee's pay requires careful attention to both federal and state law.

We discussed with the client whether the particular employee was an "exempt" or "non-exempt" employee under the federal Fair Labor Standards Act (FLSA). If the employee is "exempt," then the employer cannot deduct from the employee's paycheck for the loss of the laptop or other tools or machinery. According to the Department of Labor, such a deduction is due to the quality of the employee's work, which is not permitted under the FLSA for exempt employees.

In our client's case, the employee was a non-exempt employee under the FLSA. As such, the employee must be paid minimum wage and overtime pay if due. Since the employee used the laptop for work, the laptop was considered primarily for the benefit or convenience of the employer. The FLSA prohibits a deduction for the cost of the laptop from a non-exempt employee's wages that would cause the employee's wages to fall below minimum wage or cut into any overtime compensation due to the employee. We advised our client on the option of prorating deductions for the cost of the laptop over a period of paydays in a way that would comply with the FLSA, if the employee's employment continued.

Under Ohio law, an employer is prohibited from deducting an employee's wages for lost or damaged tools or machinery unless the employee's advance authorization is in place. We assisted our client with preparing an authorization to help avoid this obstacle in the future.

If you have an employee that has lost, damaged or failed to return company property, then wanting to deduct the cost to repair or replace the property from the employee's wages is a reasonable response. But before taking such action, we suggest you consult with legal counsel on the requirements of federal and state law to determine whether your reasonable solution is also a lawful one.