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My current employer paid me $2500 to relocate to Tempe AZ from Chicago, roughly a year and a few months ago.

I'm leaving, though I have an agreement as part of that relocation that if I leave / quit / am terminated within 18 months, I must pay it back in full.

I was under the impression that when I did this, I'd simply owe them a check or something along those lines; When I spoke to my manager, he mentioned it would be with-held from my final paycheck.

This works out beneficially for me, as if they simply pay me fewer wages on that paycheck then I suppose I won't be paying as many taxes, and possibly it'll be paid pre-tax, but it brought up a question in my mind, of whether this is actually something they're supposed to be doing.

In Arizona, is there any statute on whether an employer can withhold expenses owed back to the company, like a repayment of a reimbursement fee from an employee's final paycheck?

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Yes, there is.

2016 Arizona Revised Statutes, Title 23, Section 352 provides that an employer cannot withhold wages except when, among other things,

The employer has prior written authorization from the employee. An employer shall not withhold wages under a written authorization from the employee past the date specified by the employee in a written revocation of the authorization, unless the withholding is to resolve a debt or obligation to the employer or a court orders otherwise.

This directly applies to you: there is an authorisations in the contract with an implicit revocation dated to 18 months after the date your employment began, which your employer has explicitly accepted.

However, until that time, you remain under the obligation and they can hold the money to cover it.

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