Paycheck Deductions for Cash Shortages, Damaged Equipment or Walking Out: What the FLSA Limits

The "Free and Clear" Rule

Under 29 CFR 531.35, the minimum wage and overtime the FLSA requires must be paid "free and clear." If the employer takes money back for its own benefit and that leaves you below the minimum wage or short of overtime owed, the law treats it as a violation. See also 29 CFR 531.3 on what counts as wages, and our guide to uniforms, tools and work expenses.

Deductions That Commonly Cause Problems

• Cash register or till shortages

  The employer charges you for missing money, even though you may not be the only person with access to the drawer.

• Damaged, lost or stolen equipment

  Charges for a broken tool, a lost key, a stolen tablet or a damaged company vehicle.

• Walkout or no-notice charges

  A deduction for leaving a shift, quitting without notice or failing to return property.

• Customer "dine and dash" or walkout tabs

  Servers and bartenders charged for a customer who did not pay.

• Uniform, tool and training charges

  Costs the employer takes back that reduce pay below the legal floor. See our guide on repaying training costs.

A Simple Example

Suppose you work 40 hours at the federal minimum wage of $7.25, so your pay is $290. The employer deducts $50 for a register shortage and pays you $240. That is only $6.00 an hour, below the $7.25 minimum, so the $50 deduction cut into wages the law required to be paid free and clear. If instead you earned $15 an hour, or $600, and $50 was deducted, you would still receive $550, or $13.75 an hour. Federal law alone may not reach that deduction, but your state's law might.

Overtime Counts Too

The same rule protects overtime pay. A deduction that shrinks the overtime premium owed for hours over 40 can leave you underpaid even if your base wage is above the minimum. DOL Fact Sheet 17A explains how overtime is owed, and our guide to overtime pay covers who qualifies.

Deductions That Are Treated Differently

• Taxes and required withholdings

  Income tax and similar withholdings are normal and required.

• Court-ordered garnishments

  Child support and other garnishments follow their own rules and limits.

• Voluntary deductions for your benefit

  Health insurance premiums or retirement contributions you chose are different from charges that benefit the employer.

• Repayment of a true advance

  Some states allow recovery of a documented pay advance, often with written consent and limits.

State Law May Go Further

Many states restrict deductions even when pay stays above the minimum wage. Some require written, specific consent, some bar deductions for shortages or breakage unless the employee was at fault, and some limit what can be taken from a final paycheck. Signing a policy does not always make a deduction legal. Check your state labor department's rules or ask a lawyer.

What to Save

• Pay stubs

  Keep every stub showing the deduction, the hours worked and your rate.

• Written policies and signed forms

  Handbooks, deduction authorizations and any email or text that explains the charge.

• Records of the incident

  Who else had access to the register or equipment, and any report of what happened.

• Your hours

  Schedules or timesheets so the hourly rate after the deduction can be calculated.

Time Limits and Next Steps

The FLSA generally has a 2-year limit for unpaid wages, extended to 3 years for willful violations, and state law may give more time. You can contact the Department of Labor or your state agency, or bring a private claim, and retaliation for raising the issue is illegal. See our guides on recovering unpaid wages and final paycheck laws.

Free Case Review

Whether a particular deduction was unlawful depends on your pay rate, hours and state. Our team can review your situation at no cost, if you are eligible.