Can I be reimbursed from the employee’s paycheck if they default on the signed agreement?
HR Questions>Can I be reimbursed from the employee’s paycheck if they default on the signed agreement?

Can I be reimbursed from the employee’s paycheck if they default on the signed agreement?

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SARA asked 2 years ago
If I offer a wellness program for my employees, like pay for a gym membership, with the agreement that they will go at least 8Xs a month, can I take the gym membership cost out of their paycheck if they do not go 8Xs a month?

If I offer an Apple watch, with the agreement that they will complete different accomplishments, and they fail to meet the accomplishments, can I deduct the cost of the monthly watch subscription out of their check? When employment is terminated, the watch must be returned. If it is not, can the balance of the watch be deducted from their final paycheck?

1 Answer
Riia O’Donnell replied 2 years ago

Glad to hear you’re promoting wellness in your organization!

It’s difficult to answer your questions without more detail, but here are some avenues to explore. When you say you have a ‘signed agreement’ with staff members to participate in the program, like going to the gym at least eight times per month, or meeting milestones recorded by their Apple watch, what does the agreement actually say? Essentially you’re asking about a contract, and what your remedy is if employees fail to meet their end of the bargain.

Contract law is tricky (that’s why there are so many contract lawyers!) and the agreement you have with staff members may be difficult to enforce unless everything was spelled out in advance. Did they specifically agree in writing they’ll be required to pay the monthly membership if they don’t go to the gym the minimum amount of times? Does the ‘contract’ stipulate they will pay the monthly subscription fee if they fail to meet the phone’s milestones? Are there clauses that give employees an ‘out,’ for example if they’re sick? Does the agreement stipulate when payroll deductions will be made for failure to meet milestones (i.e., end of the month)?

If the agreement is general, without their signed acknowledgment that they’ll be making payments if they ‘default,’ you probably should not be making payroll deductions if they don’t meet threshold(s). An agreement to hit the gym eight times a month or do 10,000 steps every day is not the same as an agreement to make payments for memberships or subscriptions. If employees didn’t understand (and acknowledge) the full ramifications of the program, no matter how well-intended, they probably shouldn’t be held responsible for the payments. If they did, and understood they’d be liable for the costs, you may be able to make the deductions.

Is the program voluntary? Did you issue the watches and memberships to everyone, or only those employees who were interested in participating? If employees didn’t sign up for these wellness benefits, they should not be penalized for not participating or meeting milestones. If they did sign up, but didn’t understand they’d be liable for the cost(s) for missing the marks, they also should not be penalized.

You might re-negotiate the ‘contracts’ with staff members who are interested in participating to include costs to them if they don’t meet the pre-determined thresholds. For some staff members, this will be a motivator to get to the gym! For others it will be a legitimate reason to opt out. Some workers have second jobs, or caregiver responsibilities that make it challenging to hit the gym – others may have health issues that exclude meeting thresholds. Participation should be encouraged but not mandatory.

Another consideration may be that, depending on the employee’s wages and the cost of the membership/subscription, payroll deductions may put the employee below the minimum wage required in your area, which is illegal.

With regard to returning the watch when employment is separated, if you’ve issued the watch just like other company equipment – keys/keycards, laptops, cell phones – you have the right to request it’s returned just like any other company property. Make sure employees know the watch itself is company property – and not a gift – even if the subscription service is a gift/benefit you provide as part of your wellness initiative. When the employee is separated, the watch must be returned or the employee can be responsible for its cost, just as they would for any other non-returned company equipment or property

FYI – Responses to Q&A questions are for general information only and do not constitute legal or compliance counsel. For specific guidance, contact your local Department of Labor or legal representative. Zenefit’s On-Demand HR Advisory Services are also available for more detailed advice. If you are interested in unlimited access to our team of HR and payroll experts, check it out.


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