Is It Illegal for Your Employer To Penalize Your Pay?

When your paycheck does not match your expectations, it is easy to feel helpless—or even question whether your employer can legally reduce your wages. Whether it is for showing up late, making a mistake on the job, or missing a sales goal, employers sometimes try to penalize workers through their paychecks. But in many cases, it is not just unfair—it could be illegal.

What the Law Says About Pay Deductions

Michigan law clearly defines how and when an employer can deduct money from your paycheck. So does the federal Fair Labor Standards Act (FLSA). Employers must follow both, and whichever law offers you more protection applies.

Here is what that means in practice:

• Your employer cannot deduct from your pay for things like mistakes, damages, or losses unless you have signed a written agreement in advance that specifically allows it.
• Even with your consent, the deduction cannot bring your wages below minimum wage for that pay period.
• Deductions for uniforms, cash drawer shortages, or broken equipment are almost always illegal unless you have agreed to them in writing—and again, only if they do not cut your pay below minimum wage.
• Any deduction your employer makes without following these rules could be considered wage theft.

For salaried employees, the rules can differ slightly. If you are classified as exempt under the FLSA (meaning you do not receive overtime pay), your salary generally must be consistent from week to week. If your employer reduces your salary as punishment for missing work or performance issues, your exempt status might be challenged and potentially entitle you to back pay.

Common Examples of Illegal Pay Penalties

Sometimes, wage violations do not look obvious. They are buried in policies or show up inconsistently. Here are some real-life examples of illegal pay penalties:

• “Clopening” shifts: Your employer schedules you to close one night, open the next morning, and then deducts pay if you are late to the second shift. That is not a valid deduction.
• Uniform or tool deductions: You are required to buy a branded shirt or bring your own tools—and the cost comes out of your paycheck. If that pushes you below minimum wage, it is unlawful.
• Mistake-based penalties: You drop a tray of food, or a customer walks out without paying. If your employer reduces your pay to “cover the loss,” that could violate wage laws unless you have agreed to it in writing.
• Performance-based fines: You did not meet a quota or broke a policy, and your employer uses that as a reason to cut your pay. Unless you are in a commission structure governed by a written agreement, these deductions likely violate state and federal law.
• Late clock-ins: Some companies deduct full hours or more for being a few minutes late. Michigan courts have repeatedly found this kind of “rounding” is not permissible unless it works both ways and averages out fairly over time.

If any of these sound familiar, it is worth digging deeper. Many employees do not realize they have been underpaid for years. And you are not just entitled to what you are owed—you could also recover penalties and attorney’s fees.

Your Rights if You’ve Been Underpaid

Here is the good news: Michigan law gives workers the right to stand up to wage theft. And you do not have to navigate it alone.

If you think your employer has illegally penalized your pay, you can:

• Request an explanation in writing for any deduction you do not understand or did not authorize.
• Keep copies of pay stubs, timecards, and communications about your hours or deductions.
• Speak with a wage and hour attorney to determine if you have a claim for unpaid wages.
• File a complaint with the Michigan Department of Labor or the U.S. Department of Labor.

You also have the right to take legal action—and many wage claims are brought as collective actions, meaning other employees who experienced the same illegal deduction can join in.

If your employer has unfairly taken money from your paycheck, you do not have to accept it. At Sommers Schwartz, we help workers throughout Michigan fight back against wage theft and illegal pay deductions. Let’s talk about what happened—and how we can help you get what you are owed.