Pay Deduction for a Vacation Overage
My question involves labor and employment law for the state of: California
My husband works for a small business in VA. After living in VA for 6 years and hating it, he received permission to relocate, as did others, to his home state of CA. The relocation took longer than expected and he took more vacation than he had accrued. He received regular pay during the relocation, but now his employer is deducting about 2k per month to recover those costs. I thought that vacation hour overages were deducted from future accruals, not actual pay. Is his employer violating any labor laws?
Re: Pay Deduction of Vacation Overage
As with all payroll overpayments, employers are legally free to recover overtaken paid vacation time pretty much any way they want to. Some employers deduct from future vacation time accruals but most do it the way your husband's employer is doing it.
Re: Pay Deduction for a Vacation Overage
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Jcrooks0608
...but now his employer is deducting about 2k per month to recover those costs.
Has he agreed in writing to have the deduction made from his wages?
Re: Pay Deduction for a Vacation Overage
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Jcrooks0608
his employer is deducting about 2k per month to recover those costs.
Watch the deductions. I suspect the overage occurred in 2016 and will be on his W-2, but I have this feeling that the employer is deducting the gross in 2017, and you're going to get ripped off (you end up paying taxes on phantom income) on your taxes unless you get the employer to fix it.
Re: Pay Deduction for a Vacation Overage
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chyvan
Watch the deductions. I suspect the overage occurred in 2016 and will be on his W-2, but I have this feeling that the employer is deducting the gross in 2017, and you're going to get ripped off (you end up paying taxes on phantom income) on your taxes unless you get the employer to fix it.
Depends on how they are deducting it. If they are deducting it pre tax, then nobody is getting cheated. It would be sensible for them to deduct it pretax.
Re: Pay Deduction for a Vacation Overage
With great trepidation, I'm going to have to say eerelations's comments are at best incomplete. If he was an exempt employer they can not "recover" such money (at least not in Virginia, and I'm pretty sure not Federally).
Re: Pay Deduction for a Vacation Overage
I thought that vacation hour overages were deducted from future accruals, not actual pay. Is his employer violating any labor laws?
California is the only state that cares even a little bit about how vacation accrues, and California doesn't care very much. I seriously doubt that any labor law exists which dictates how vacation overages are managed unless CA has some. However, CA does have some very specific regulations about the methods an employer may use to correct overages (although they are not prohibited from doing so - even CA does not allow an employee to benefit from an error that would create a windfall). I am not a Payroll person; I had some limited experience with Payroll back in the 90's and I haven't managed employees in CA since 2002 so I don't recall what they are, but DAWW, hrforme or Taxing Matters will probably know. I realize the company is in VA but since the employee is now in CA I'm by no means sure CA law wouldn't come into it somewhere.
All that being said, I just want the OP to realize that if her husband was overpaid, the company is entitled to reimbursement. They may or may not be doing it wrong (I suspect they are) but he is not entitled to keep pay he did not earn or have vacation paid he was not entitled to, just because it was the employer's error. I think, from what you've said, that you do understand this but I want to make it clear nonetheless.
Re: Pay Deduction for a Vacation Overage
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llworking
Depends on how they are deducting it. If they are deducting it pre tax, then nobody is getting cheated. It would be sensible for them to deduct it pretax.
I don’t think they employer may properly deduct it pre-tax. The OP is getting paid that money and then the employer is deducting it to recoup the claimed vacation pay overage. So the amount paid but deducted is still wages paid that must be included in gross wages in 2017 on his W-2. But under that circumstance the OP can then fix the problem on his 2017 return using the claim of right doctrine. In the end that would get the tax amount correct.
Re: Pay Deduction for a Vacation Overage
How much money are we actually talking about?