Don’t Get Burned: A Step-by-Step Checklist Before Deducting for Unreturned IT Equipment

It’s a common frustration for employers—an employee departs and your company laptop, phone, or access badge doesn’t return.  You're left wondering: Can we just deduct the cost from their final paycheck?

Not so fast. Withholding wages for unreturned company property is a legal minefield that varies by state, and missteps can lead to costly penalties.  Before touching that final paycheck, make sure you’ve taken these essential steps:

1. Check Your State’s Wage Laws

Some states prohibit any deductions from final paychecks, even if the employee failed to return expensive equipment.  Others allow it, but only under strict conditions—like having a prior signed agreement. Know the rules in your jurisdiction first.

2. Review Your Employment Agreement and Company Policies

Did the employee sign a document or agree to a policy that clearly outlines:

• What property must be returned?

• The return deadline after termination?

• That failure to return may result in payroll deductions?

If not, you may not have legal grounds to withhold anything.  Having clear documentation protects both sides and can serve as evidence if things escalate.

3. Send a Formal Demand Letter

If the property hasn’t been returned:

• Send a written demand (email or certified mail) listing the items and their value.

• Include a return-by deadline.

• Mention the consequences of non-return (e.g., deduction, legal action), based on your policy and local law.

Keep your tone professional and factual.  This not only shows good faith—it also strengthens your legal standing.

4. Make a Good-Faith Effort to Communicate

Sometimes the employee just needs a reminder.  Follow up with a phone call or message to clarify expectations.  This is especially important if the person left abruptly or under stress.

5. Document Everything

Keep records of:

• The signed property return agreement or handbook acknowledgment.

• Any communications about the equipment.

• The demand letter and delivery confirmation.

If you do end up making a deduction, solid documentation can help defend your actions during any dispute or audit.

6. Consider Alternatives to Deduction

If your state prohibits or limits paycheck deductions, consider other routes:

• Invoice the employee separately.

• Use a collections agency if the item is high-value.

• Write it off if retrieval costs outweigh the item’s worth.

7. Consult Legal Counsel Before Acting

Never make a deduction without legal review—especially in states with strict wage theft laws.  One wrong move could cost you more in penalties than the lost equipment ever would.

Final Word

Before deducting from an employee’s final paycheck for unreturned property, take a step back. Review your policies, document every step, and seek legal advice. The right process now can save you serious money—and headaches—later.

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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.