Sharing the Cost of Business

Written by Jeffrey Steinberger

Many questions arise about the types of business-related expenses for which an employer can hold employees responsible. This responsibility means that employees must either pay for particular expenses or the employer is allowed to deduct expenses from the employees' paychecks. While labor laws can vary from state to state, there are some generally accepted rules.

Most private employers that require employees to wear uniforms (wearing apparel of distinctive design and color) must provide and maintain the uniforms. Also, private employers usually must provide employees with hand tools and equipment used on the job, although this varies depending on the employee's pay. This also varies depending on the nature of the business of the employer. For example, beauty salon and barbershop employees are usually required to provide their own equipment.

Upon termination, employees are required to return employer-furnished uniforms and equipment. Employees are not required to reimburse the employer for lost or damaged items unless the loss or damage was caused by dishonesty, an intentional act or gross negligence. Reasonable wear and tear, accidents or simple negligence are considered costs of doing business. These reimbursement rules also limit an employee's duty to reimburse the employer in the event of cash shortage, customer pilferage or breakage of merchandise.

An employer who provides uniforms and equipment may require that employees pay a deposit to ensure the items will be retuned on termination. The deposit must estimate the depreciated cost of items not returned.

Employees may be required to furnish insured vehicles during their employment, but the employer must give the employee a reasonable mileage reimbursement based upon the expenses of owning and operating the vehicle. Most states accept the mileage reimbursement amount set by the Internal Revenue Service.

The rules are not uniform regarding an employer's right to charge back commissions paid on merchandise that is later returned to the store or on sales that are canceled by the customer. Often, charge-backs are not allowed under a state's labor law unless the employee has agreed in writing to the charge-back policy of the employer.

Under the law of every state, an employer is authorized and, in fact, required, to withhold from employees' paychecks for state and federal income taxes, social security, state disability taxes and the like. Also, an employer is required to honor court-ordered garnishments of an employee's wages.

Most states allow an employer to deduct wages for tardiness, although the amount withheld is often based on how tardy the employee is.

Generally, employers are prohibited from seeking reimbursement from employees for the cost of any physical examination or medical testing required as a condition of employment.

The rules regarding whether or not given costs and expenses are the responsibility of an employer or employee are often complicated and vary from state to state. Employers must seek competent advice to know and understand the rules applicable to their specific businesses and individual circumstances because violations may result in civil and criminal penalties.