Do We Need a Written Agreement to Deduct the Cost of Unreturned Equipment from an Employee’s Final Pay?

Yes — in most cases, you do need a written agreement in order to legally deduct the cost of unreturned equipment from an employee’s final paycheck.

Under the Fair Labor Standards Act (FLSA), employers are allowed to make certain deductions, but only if those deductions don’t reduce the employee’s pay below minimum wage or violate overtime rules.  Even then, many states have their own laws that require a signed, written agreement from the employee authorizing the deduction ahead of time.

Some states, like California, New York, and Massachusetts, strictly prohibit deductions for lost or unreturned property under almost any circumstance — written agreement or not. Others, such as Texas or Florida, may allow such deductions if there is clear documentation and prior consent.

Bottom Line

To legally deduct the cost of unreturned equipment:

• Get written authorization in advance — ideally during onboarding or when equipment is issued.

• Ensure compliance with both federal and state laws.

• Consult a local employment law expert, as rules vary significantly by state.

When in doubt, avoid risking a wage claim and focus on proactive asset management strategies instead.

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.