Q: Our company messed up and did not take out taxes from an employee's check in 2008. The paychecks always came sealed from the payroll company, so we as the employer did not notice the mistake. The employee must have known but kept her mouth shut. In early 2009, after W2s were given out, she told us, and we scrambled to correct hers. We have paid the $1,350 in taxes that should have been deducted from her checks. And she agreed to allow us to deduct certain amounts from her paycheck every week. Now the employee is quitting and won't sign a promissory note. Can I hold back her last paycheck and apply that money toward what she owes us?
A: Labor law allows you to deduct some of the back taxes from her last check, but you are limited to 10 percent of the check, according to the New York State State Department of Labor.
Normally, you need her written permission for the deduction, but taxes are the exception. As for the remaining amount, if she doesn't come to her senses and do the right thing, you will have to sue her for the taxes, the department said.
I spoke with a payroll company to see how such an error could have resulted and gone on for a year. It generally happens because a company misclassifies an employee as an independent contractor, said Robert Basso, owner of Advantage Payroll Services. You seemed to hint at that when you said, "Our company messed up."
Companies don't deduct taxes from independent contractors' checks. Instead, the independent contractors are responsible for sending their tax payments to governmental taxing agencies.
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So the payroll company most likely coded the worker as an independent contractor, or a 1099, based on information from you, Basso said. As a result, the payroll company didn't deduct taxes from her check. But the taxing agencies wanted their money and you had to pay up. Now you are stuck with trying to figure out how to get the money back.
Mistakes happen with payrolls whether they are the fault of the employer or the payroll company. But to prevent them from dragging on, Basso suggests you scrutinize the electronic reports generated after the payroll is processed. Clients receive them the same day or the next day, he said.
"What you are supposed to do is review all the work that has been done," he said.
Q: I work for a church and our new pastor has made lots of scheduling changes. I am now salaried and work 35 hours a week. Before, I worked as many as 42 hours a week because my job requires a lot of work after the office closes to the public. Since I am salaried, does the church have to pay me when I work more than 35 hours?
A: Being salaried doesn't determine whether you should be paid for the extra time, your status does.
If you are nonexempt, meaning you fall outside the professional, executive, administrative and outside-sales categories, you have to be paid for all the time you work. And that includes overtime pay of at least 1 1/2 times your regular hourly wage when you work more than 40 hours a week.
That's true even though you work for a religious institution. Exemption from overtime and minimum wage applies to religious figures such as ministers, priests and nuns, not to employees, said Irv Miljoner, who heads the Long Island, N.Y., office of the U.S. Department of Labor.
You could be exempt if you are an office manager and meet the Fair Labor Standards Act's tests for a manager, he added. The tests require you earn at least $455 a week; have duties that primarily involve management; supervise at least two full-time employees and have the power to hire and fire.
