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Legality of Pay Deduction Depends, in Part, on Job Status of Employee

September 24, 2000

Q I own a small service business. Daily receipts are dropped in a floor safe.

When an envelope containing $900 disappeared, I deducted the amount from the manager's bonus because she is responsible for the money in the safe and was the only other one with the combination. The receptionist said she had put the envelope in the safe.

The manager no longer works for me but has told some of my employees that she is going to take me to court to seek the amount deducted from her bonus.

Didn't I have the right to make this deduction?

--S.B., Corona


A Yes, provided your manager met the executive exemption to overtime laws that typically applies to managers. This requires that the employee spend more than one-half of his or her time engaged in management tasks, regularly supervises and directs the work of two or more employees, has the authority to hire or fire employees or recommend such action, and customarily and regularly exercises discretionary powers.

Just because an employee has the title of "manager" does not mean that the employee will satisfy the legal test for the managerial exemption.

If the employee is not subject to one of the overtime exemptions, California law prohibits an employer from taking deductions from pay for cash shortages resulting from mere negligence.

Such a deduction may be taken only if a "nonexempt" employee is guilty of gross negligence, dishonesty or willful misconduct. Ordinarily, the mere fact that an employee had access to money that vanished is not sufficient to satisfy this standard.

--James J. McDonald Jr.

Attorney, Fisher & Phillips

Labor law instructor, UC Irvine

An Employee's Recourse if Bonus Is Overdue

Q I am a sales executive for a small company and have a contract that specifies the bonuses I will be paid.

The company has owed me a bonus of more than $20,000 for nearly a year. What recourse do I have, apart from suing my employer, which I do not want to do?

--J.M., Los Angeles


A The first step is to talk to your employer. Perhaps the company believes it does not owe you the $20,000. Maybe your employer has calculated your sales performance differently or has a different interpretation of the contract language.

If you and your employer do have differences, make sure you understand exactly what they are. Even if you do not wish to sue your employer, you may still want to consult an experienced employment attorney to determine whether your view of the contract is reasonable.

If you still believe you are correct but do not wish to take any legal action, you will have to try to convince the company that the $20,000 is due. You may want to write a letter explaining your position or retain an attorney to do it for you.

Keep in mind that taking legal action does not always mean pursuing a lawsuit. It can be as simple as filing a claim with the California labor commissioner. The commissioner's office will schedule a settlement hearing and, if that does not resolve the matter, will set a formal hearing to listen to the evidence from both sides and make a decision.

You also should know that it is against the law for your employer to retaliate against you because you filed a wage claim.

There's another option. If you leave your employer at some point, you might be able to pursue a claim if the statute of limitations has not expired.

--Josephine Staton Tucker

Employment law attorney

Morrison & Foerster


If you have a question about an on-the-job situation, please mail it to Shop Talk, Los Angeles Times, P.O. Box 2008, Costa Mesa, CA 92626; dictate it to (714) 966-7873 or e-mail it to Include your initials and hometown. The Shop Talk column is designed to answer questions of general interest. It should not be construed as legal advice. Recent Shop Talk columns are available at

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