Legislature’s Amendment to Wage Deduction Statute Unwinds Judgment

Applying Indiana’s recently-amended Wage Deduction statute, Ind. Code § 22-2-6-2, the Seventh Circuit vacated the judgment awarded to an employee class on wage withholding for rental cost of uniforms.   Weil v. Metal Technologies, Inc.  The employer, using its form document signed by the employees, deducted from employees’ wages to cover the rental of uniforms over a course of many years.  Of course, using a written form signed by the employee for a wage deduction satisfies the statute’s basic requirements.  However, the employees argued that Indiana’s wage deduction statute does not allow deductions for the rental of uniforms.  Instead, the statute allowed deductions for “the purchase of uniforms,” but did not specifically mention rental.  The employees argued, then, that the employer had improperly deducted all of their wages for rental of the uniforms for years.  The employees convinced the district court that the deduction was indeed not specifically authorized by the statute and therefore, was unlawful.  The employer appealed.  The employees also separately argued that the employer failed to pay them wages according to their timecards, but the district court decertified the employees’ attempt to pursue that claim as a class.

On January 18, 2019, the Court heard oral argument.  The Court decided the case on May 20, 2019.  As of the day of the oral argument in January, the employees stood to win the wage deduction issue and have their more than $100,000 judgment on that issue affirmed.

However, after the oral argument, the Indiana legislature amended the wage deduction statute.  See Ind. Code 22-2-6-3(b).  That amendment specifically authorized wage withholding for uniform rentals, and also, made the amendment retroactive.  According to the Court, this “wrinkle” required the Court to vacate the judgment and remand the case to the district court to reconsider the wage-deduction claim in light of the new law which expressly stated the legislature’s intent to have it apply retroactively.  Quoting the Supreme Court, the Court stated: “When a new law makes clear that it is retroactive, an appellate court must apply that law in reviewing judgments still on appeal that were rendered before the law was enacted, and must alter the outcome accordingly.”

On the second issue – failure to pay for time recorded on employees’ timecards – the Seventh Circuit affirmed the district court’s decertification of the employee class.  The Court also took the opportunity to remind that time cards do not necessarily tell the whole story.  In other words, time cards are not per se evidence of hours worked.  Employees suing their employers for unpaid wages must still prove that they were actually working for all time shown on the time card and cannot rely exclusively on the hours recorded.

The legislature’s amendment permitting wage deductions for rentals of uniforms, as opposed to purchase of uniforms favors employers.  But, this case also reminds employers to be mindful and cautious with employee wage deductions.  Deductions are only lawful when they are for one of the specific items in the statute.  An employer’s failure to have its forms strictly comply with the statute can result in having to defend a very expensive lawsuit.  Employers using wage deduction forms should consider having them reviewed to ensure compliance with the statute.