Are There Different Rules for Exempt vs. Non-Exempt Employees When It Comes to Deductions for Unreturned Property?

Yes — there are important differences!

For non-exempt employees, deductions for unreturned company property are generally allowed under federal law if they don’t reduce the employee’s pay below the minimum wage or interfere with overtime pay. Even then, many states require written authorization from the employee, and some restrict these deductions altogether.

For exempt employees (such as salaried managers or professionals), deductions can be riskier. Under the Fair Labor Standards Act (FLSA), improper deductions can jeopardize their exempt status — potentially entitling them to back pay for overtime. In most cases, it's safer to avoid deductions from exempt employees' final pay entirely, unless clearly permitted by state law and covered by a written agreement.

Always check your state’s wage laws and consult legal counsel before making any deductions — the rules can vary significantly.

The insights provided herein are for informational purposes only and should not be construed as legal advice. The information is not exhaustive, and laws vary significantly by jurisdiction and specific circumstances. You should consult with a licensed attorney in your relevant jurisdiction for advice regarding your individual situation.