What Employers Must Know About Deducting the Cost of Uniforms and Other Essentials

What Employers Must Know About Deducting the Cost of Uniforms and Other Essentials

The United States Department of Labor created the Fair Labor Standards Act (FLSA) to help regulate issues that arise between employer and employee. One of these is a tax deduction to offset the cost of employee uniforms. Because the FLSA considers uniforms a primary benefit to the employer, it doesn’t allow businesses to include the cost of uniforms as wages. That means an employer cannot claim a uniform credit to meet overtime and minimum wage obligations.

When the Cost of Uniforms Drops Employee Wages Below Minimum Wage

In 2018, two cases regarding the cost of uniforms came under the authority of the FLSA. In the first, Disney theme parks paid $3.8 million dollars in back wages to more than 16,000 employees because deducting the cost of uniforms from their paychecks brought their gross pay to less than minimum wage.

At Life Time Fitness, the chain of gyms agreed to pay $1 million in back wages to just under 16,000 employees for the same reason. Due to the high-profile nature of these cases, it’s a good idea for business owners of companies of all sizes to familiarize themselves with what the FLSA has to say about uniforms.

Uniforms and the Department of Labor

While the FLSA doesn’t require employees to wear uniforms, employers may do so at their discretion. However, it considers the issuing and maintenance of uniforms a business expense for employers. Employers may require employees to bear the cost of uniform purchase and maintenance but doing so cannot drop their hourly wage below the federal minimum of $10.60 as of 2019.

To get around this regulation, employers may prorate the uniform deduction over several paychecks rather than deducting the cost all at once. Employers can also consider providing the uniforms at their own cost and/or offering free laundering services to ensure that they don’t run afoul of this FLSA regulation.

Other Items the FLSA Considers for the Benefit of the Employer

Here are some other common examples of items that fall under this FLSA regulation:

  • Tools required to perform a job
  • Damage to or theft of employer property due to negligence
  • Financial losses due to inability to collect from customers

In these and similar types of situations, an employer may not require an employee to reimburse the cost if it drops his or her wages below minimum wage or prevents the employee from receiving overtime pay that he or she earned.

Schedule a Consultation with Palmetto Payroll for Further Clarification

Unfortunately, the law has a lot of gray areas that can confuse both employers and employees. If you’re struggling to understand what the right thing is to do for your business, we invite you to meet with one of our payroll specialists to go over the FLSA in greater detail. We would hate to see you owe a fine to the Department of Labor for an innocent mistake and are happy to help you avoid that.