In Gordon v. City of Oakland, Case No. 09-16167 (9th Cir., Nov. 19, 2010), the United States Court of Appeals for the Ninth Circuit (which includes Nevada) held that the City could properly require an employee who had left a job within a specified period of time to reimburse the City for training costs that the City had paid in anticipation that the employee would remain employed with the City for that period of time, without violating the Fair Labor Standards Act ("FLSA"). An important part of the Gordon decision was the fact that the City actually paid the employee's full final paycheck, but later sent her a reimbursement request for the training costs she had previously agreed to repay. The employee unsuccessfully argued that the City's repayment request violated the FLSA and California wage and hour laws because, had she had to pay for the training, her wage rate would have fallen below the applicable minimum wage for the final pay period. In affirming the lower court's decision to throw out the employee's case, the Ninth Circuit noted that, by advancing the training costs to the employee, the City had essentially given her a loan, and that there was a difference between withholding earned wages and asking for a loan repayment.
The Gordon decision brings to the forefront a frequent practice by Nevada private employers which, unfortunately, also frequently runs afoul of Nevada law. For example, it is not uncommon for Nevada employers to issue credit cards to employees, or entrust them with expensive equipment or materials, or permit them to use a company vehicle in the course of their employment. In those circumstances, employers also often require the employee to execute an authorization, allowing the employer to deduct any related costs for which the employee is responsible, from the employee's final paycheck (e.g., any outstanding credit card charges for personal expenses, loss of materials or equipment, etc.) Employers should be mindful, however, that Section 608.160 of the Nevada Administrative Code provides that, with very limited exceptions, an employer may not deduct any amount from the wages due an employee unless:
(a) The employer has a reasonable basis to believe that the employee is responsible for the amount being deducted by the employer;
(b) The deduction is for a specific purpose, pay period and amount; and
(c) The employee voluntarily authorizes the employer, in writing, to deduct the amount from the wages.
NAC 608.160 specifically provides that "[a]n employer may not use a blanket authorization that was made in advance by the employee to withhold any amount from the wages due the employee." Rather, as stated in NAC 608.160, the employer must secure the employee's written authorization for the deduction "for a specific purpose, pay period and amount." In other words, the authorization which the employee made before actually incurring the expense (and on which employers often rely) is likely insufficient to support the deduction from wages under Nevada law.
Employers often find this requirement troublesome because employees may refuse to execute the authorization or may be otherwise unavailable to do so, or both (as in cases of terminated employees). Many employers feel that withholding money from the employee's final paycheck is the only way they could ever recoup the losses that the employee caused the employer to suffer. While in reality that may sometimes be the case in reality, the proper way to recoup these losses (absent a written authorization consistent with NAC 608.160) is to bring a separate action against the employee to recover the losses. Ordinarily, the disputed amount is under $5,000.00, which allows an employer to file a lawsuit against the employee in Small Claims Court, even without an attorney. If the amount exceeds $5,000.00, but is less than $10,000.00, an employer can file a lawsuit in Justice Court..
On a final note, even where the employee properly authorized the wage deduction, employers should be mindful of whether the total wages paid to the employee for the respective pay period fall under the applicable federal and Nevada minimum wage rates. If this is the case, the full deduction may still be inappropriate.
