Having the right policies in place is a critical step in establishing options for recovering money from departing employees. Among other things, you should consider adopting policies regarding: overpayments; payroll deductions; concession services; loans; pay advances; vacation or paid vacation advances; training payments; and restitution of property. These policies may set out the circumstances, terms and conditions under which the dealer will make such payments or deductions. They should also explain the consequences of non-payment of an employee who leaves.
In addition to having the right general policies, you should use documents in each situation to protect yourself from employees who do not voluntarily return money to your dealership when they leave. Among other implementation documents, concessionaires should consider using: formal loan agreements; promissory notes; receipt forms for goods such as electronics, tools, equipment or clothing; deduction authorization forms or language integrated into other forms; non-disclosure or other agreements imposing post-termination requirements such as return of property; and stand-alone memos commemorating the specific terms and conditions of the arrangement.
A growing number of state and local laws apply to payroll deductions or place other limitations on an employer’s ability to bill or collect money from an employee. Before adopting any policy and implementing documents, you should review and comply with these applicable laws.
For example, some states require an employer to obtain written authorization before making any deductions from an employee’s wages. Some states also require that you itemize the specific amounts to be deducted from the employee’s paycheck and the reasons for the deduction. In addition, punitive or lump sum damages may be imposed on you for improper compensation practices.
The Fair Labor Standards Act (FLSA) can come into play in several ways to make deductions from an employee’s pay. For example, the salary of a non-exempt employee should generally not be reduced below the minimum wage for all hours worked during the work weeks of the last pay period. Thus, it would be a violation of this law to reduce the salary of a cashier below the applicable minimum wage due to a lack of cash, uniforms or tools not returned.
On the other hand, a dealership could reduce the salary of a non-exempt employee below the minimum due to a cash advance – of course assuming compliance with other applicable laws, such as the one requiring that all deductions be made. made in writing. In addition, one of the conditions of executive and administrative exemptions is that the worker is paid on a “salary basis”. Certain deductions can potentially “destroy” the salary base of the remuneration, thus rendering the worker ineligible for these exemptions.
There are several options when trying to collect money from a departing employee, including:
- Ask the departing employee to voluntarily reimburse the money owed;
- Deduct money owed from the last paycheck to the maximum extent permitted by law and in accordance with any state or local laws requiring written permissions or other conditions;
- Enter into a payment agreement with the employee, requiring him to sign a binding promissory note;
- Threatening to sue or actually sue the employee in court to collect the money owed; Where
- Forgive the employee, save on collection costs, and write off the money as bad debt.
If the employee has been owed money as a result of an error, such as an incorrect overpayment or failure to obtain a payroll deduction form or property receipt, the most important thing is to resolve the problem so that it does not happen again. When faced with a collection situation, your dealership should always think about the circumstances and see if there are any improvements to the process, including strengthening or adding new documents to the process.
We cannot stress enough the importance of promptly consulting your labor and employment lawyer when a debt collection situation arises. You should have your lawyer on the speed dial to help you out when you are faced with a situation where an employee owes money and to help you deal with the consequences (if any). Every situation is different and the laws are constantly changing. Always consult your lawyer to help you make appropriate decisions in the specific circumstances of each situation.
There are many scenarios where employees can leave an employer who owes the dealership money. Hopefully the guidelines in this article serve as a starting point for situations where your dealership needs to recover money from a deceased employee.