Can Companies Dock Stimulus Money from Employee Pay? Texas Company Looking to Do Just That

Before President Donald Trump signed the Coronavirus Aid, Relief, and Economic Security Act (H.R. 748[1]), also known as the CARES Act, there were a lot of “What if?” questions as to where the money was headed and who would receive it.

For employees of a company in Austin, Texas, the “what if” questions are being replaced with one big “Why?” question: Why is the company looking to dock the pay of employees who receive the stimulus “checks” scheduled to be sent out in a few weeks?

According to an unnamed employee of the as-yet-unidentified company who spoke to local news station KXAN, the company sent a form to workers titled “Employee Acknowledgement of ‘Government Assistance’ Pay Reduction.” The employee said, “The form says they are preemptively deducting funds from our paychecks. That number is based on what they’re anticipating the government relief fund to be.”

People whose tax filing status is single and earn less than $75,000 / year will receive $1,200. Joint filers with incomes less than $150,000 will get $2,400. Another $500 for each dependent child will be paid regardless of the parents' filing status.

The anonymous employee said that about 25% of the workforce was already laid off and these employees are expected to receive the household payments along with a boost over normal unemployment benefits.

Workers who remain on the job cannot collect any unemployment cash but would receive their normal wages along with any stimulus payment. If the company cuts wages equal to the stimulus payment plus half of any stimulus payment for any children, that would put the employed worker at quite a disadvantage compared to the laid-off worker.

The obvious allegation is that the company wants to replace a worker’s pay with the government’s payments meant for the consumer to spend and in theory, help the American economy.

Unemployed people have another advantage in that laws generally favor their rights over the former employer over disputes about benefits. Laws that protect the employed are not as strong, according to labor attorney Austin Kaplan.

Kaplan told KXAN, “Employers can lay them off or fire them for good reason, bad reason or no reason at all as long as it’s not for an illegal reason with no notice whatsoever. From a legal standpoint, in Texas, the law isn’t as strong in employee rights as I would like it to be, but there is a federal law called the ‘Fair Labor Standards Act.' That law says that employees have to get at least minimum wage from the employer during their regular pay period.”

Kaplan said that he believed the company would be violating federal law if cutting some employee's paychecks would put the payroll payment below minimum wage.

The unnamed employee did ask the company’s HR about the consequences of not signing the agreement and said, “I would much rather sit in the unemployment line and be proud of my decision to leave a company that’s making these kinds of requests or demands than hate myself for going along with it because I don’t agree with it.”

The company said they would likely be sending out an amended version of the agreement soon.