Tennessee Legislature Enacts Stringent Requirements For Employee Wage Deductions

Tennessee Legislature Enacts Stringent Requirements For Employee Wage Deductions

Recent Tennessee legislation provides guidelines on an employer’s ability to deduct amounts from an employee’s wages to offset money owed to the employer. This new law takes effect July 1, 2011 and expressly permits an employer to deduct amounts owing from an employee, if prior to the date wages are due and owing, the employer enters into an agreement to advance the employee wages, loan the employee money, or permit an employee to make personal charges on a company credit card.

Before making the deduction, the employer must comply with the following specific procedural requirements:

prior to any advancement, loan, or credit card charge, the employee must sign a written agreement that allows the employer to offset the wages for amounts owed to the employer;
at the time the deduction is made, the employer must possess a copy of this signed agreement; and
fourteen days prior to the payment of wages, the employer must notify the employee in writing of the following:

(a) that there is an amount owed,

(b) that a deduction will be made from the employee’s wages if the amount owed is not paid before the wages are to be paid, and

(c) that the employee may contest the amount owed by submitting a sworn affidavit to the employer (and a copy to the Department of Labor and Workforce Development) no later than seven days from the date the employer notifies the employee of the amount owing.

Provided the above conditions are met and the employee has not paid the amount owed or submitted an affidavit contesting the amount owed, the employer may make a deduction from the employee’s wages.

However, if the employee submits a sworn affidavit, the employer must commence a civil action in court to recover the contested amount and cannot deduct the contested amount from the employee’s wages.

While this legislation provides clarity as to what procedural requirements must be met before an employer can make a wage deduction to recover monies owed by any employee, these procedural requirements impose greater obligations on Tennessee employers who previously were able to make wage deductions after obtaining the employee’s written authorization. As this act takes effect on July 1, 2011, we recommend that Tennessee employers review their practices regarding wage deductions.