Question: Can we legally require employees to reimburse the company for damage to customer or company property (i.e., the full amount of damages or insurance deductible)?

Answer: Many employers have policies requiring employees to reimburse them for damage to company property, usually through payroll or final paycheck deductions. Before implementing such a policy, you must consider state and federal laws that may restrict or prohibit your ability to make such payroll deductions.

For example, under certain conditions, employers in Wyoming may deduct damages caused by an employee’s negligence, which may include damage to customer property. If the employer has received an insurance payment to cover those damages, then it can offset up to $250 of the costs of the deductible from the employee’s wages. In Colorado, however, an employer is generally not allowed to deduct damage to company or customer property.

Under the federal Fair Labor Standards Act (FLSA), you may make a payroll deduction for damage to company property if you have written authorization from the employee to do so and if the deduction doesn’t bring a nonexempt employee’s wages below the statutory minimum wage. This doesn’t hold true for exempt employees.

Deductions from the salaries of exempt employees for damages to company property are not permissible under the FLSA because they receive a regular, predetermined, and guaranteed salary, and such deductions violate the salary basis rule.

If you face limitations or prohibitions on payroll deductions, you may still have recourse for damage to company or customer property by meting out discipline, terminating the offending employee (subject to any employment contract or collective bargaining agreement), or filing a civil suit or making a claim in small claims court to recoup costs.