The Ninth Circuit Court of Appeals has ruled that deductions for unpaid balances on company-guaranteed credit cards from paychecks issued to terminated employees did not violate the federal Fair Labor Standards Act (FLSA). Key to the court’s decision was the fact that the wages actually paid after the credit card deductions exceeded the FLSA’s overtime and minimum wage requirements.
Six of the employees received a single paycheck after their termination, which included both pay for the final pay period and accrued vacation and sick leave pay, reduced by the amount of the credit card balance. Thirteen employees received two separate checks, with the credit card balance deducted from only one of those checks. For five of those employees, both checks included wages. For the other eight employees with two checks, one check included only leave pay, and the credit card deduction was taken from that check. In each case, whether the employee received one or more checks, the credit card deduction was taken from a check that also included leave pay, and the credit card deduction was less than the amount of the leave pay in all instances. Based on those facts, a U.S. district court concluded that Costco did not violate the FLSA’s minimum and overtime wage requirements, because no employee had an amount withheld high enough to invade minimum or overtime wages.
The employees appealed the district court’s decision, charging that the court improperly applied the credit card deductions to the employees’ accrued leave pay.
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