Employer Requires Employees to pay Cash Gift to Owners

Question

Every year an Alabama based small business requires every employee (except for the daughter of one of the owners, apparently) to pay a $30 cash gift that is split between the two owners. In theory, this is a "Christmas gift" to the owners, but is orchestrated by the office manager/wife of one owner. An unconfirmed rumor indicates that if an employee does not pay the $30 ahead of time, it is deducted from their pay check. It is confirmed that a list is kept of which employees have or have not paid this money.

This does not seem legal to me, but I cannot find any specific information regarding this. Can any expert here either vouch whether or not this is legal and/or point me in the right direction to verify the legality against current laws?

As an additional note, employees are reportedly required to attend the company Christmas party or forfeit their bonus checks. The bonus checks are not based on performance, so, while this seems unethical, it does not appear to be illegal. However, if it is illegal by some statute, I would also appreciate any links or information regarding this as well. Thanks.

Answer 1

If the money is deducted from a paycheck, then for hourly/non-exempt employees it is a violation of the federal Fair Labor Standards Act to reduce the pay below the minimum wage for deductions "for the benefit or convenience of the employer"

Other Items: Employers at times require employees to pay or reimburse the employer for other items. The cost of any items which are considered primarily for the benefit or convenience of the employer would have the same restrictions as apply to reimbursement for uniforms. In other words, no deduction may be made from an employee's wages which would reduce the employee's earnings below the required minimum wage or overtime compensation.

Certain executive and sales roles are excluded from the following. For salaried, overtime exempt employees:

Circumstances in Which the Employer May Make Deductions from Pay Deductions from pay are permissible when an exempt employee: is absent from work for one or more full days for personal reasons other than sickness or disability; for absences of one or more full days due to sickness or disability if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for salary lost due to illness; to offset amounts employees receive as jury or witness fees, or for military pay; for penalties imposed in good faith for infractions of safety rules of major significance; or for unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct rule infractions. Also, an employer is not required to pay the full salary in the initial or terminal week of employment, or for weeks in which an exempt employee takes unpaid leave under the Family and Medical Leave Act.

Effect of Improper Deductions from Salary The employer will lose the exemption if it has an “actual practice” of making improper deductions from salary. Factors to consider when determining whether an employer has an actual practice of making improper deductions include, but are not limited to: the number of improper deductions, particularly as compared to the number of employee infractions warranting deductions; the time period during which the employer made improper deductions; the number and geographic location of both the employees whose salary was improperly reduced and the managers responsible; and whether the employer has a clearly communicated policy permitting or prohibiting improper deductions. If an “actual practice” is found, the exemption is lost during the time period of the deductions for employees in the same job classification working for the same managers responsible for the improper deductions. Isolated or inadvertent improper deductions will not result in loss of the exemption if the employer reimburses the employee for the improper deductions.

Answer 2

business requires every employee ... to pay

rumor indicates that if an employee does not pay the $30 ahead of time, it is deducted from their pay check.

...is requiring a gift be paid in the first place a violation of any laws?

Do they actually require? Or simply ask? Just thinking about the difference between the two words (and which one actually applies here) will get the question substantially answered.

If you walk down the street and a passer-by asks (or even says "I require") you to pay, would that be legal? Sure it would — there is nothing illegal with asking for anything per se. Asking does not make them entitled though — you can tell them where to get off or simply ignore. Or you can pay if you feel generous, sympathetic or motivated in any other way.

Now, what changes if the passer-by is your employer? You have an agreement with them which sets your relationship. You both require each other to do something (e.g. they require you to perform your duties and you require them to pay wages).

So, your question essentially boils down to this: does your employment agreement requires you to pay for their gifts? If it doesn't, technically, they are no different in their gift requirements to someone you just met on the street.

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The above is pure legal aspect of the question. In workplace reality, when employers ask/require something they are not entitled to, they simply intend to take advantage of their employees because they do not expect them to object. Employers know — most employees accept their authority and would rather avoid arguments, disputes or even questioning as it may affect their promotion or even get them fired. They know you would probably rather pay $30 every Christmas than suffer from the stress of being frowned upon.

So, it is always up to specific circumstances of your employment and your own judgment whether to question those opportunistic Christmas endeavors of your employer (and be prepared to be frowned upon or even unjustifiably fired), or just follow the flock and be generous to your bosses.