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COA: Company cannot withhold ‘voluntary’ deductions from ex-employee's pay

January 23, 2017

A plumbing and electrical company cannot impose “voluntary” tax deductions on a former employee’s final paycheck without statutory authority, nor can it force that employee to pay a $1,000 insurance deductible after an auto accident, the Indiana Court of Appeals held Monday.

Jason Huxley worked for Godby Heating Plumbing Electrical between March 2012 and June 2013, when he voluntarily left his job and claimed he was owed $1,102.97 for hours worked, plus accrued vacation time. When he received his last earnings statement, it showed gross wages of $1,102.97 with a $986.71 deduction for vacation time Godby claimed Huxley had used but not accrued, leaving $116.26 in wages. After other benefits and “voluntary” deductions, Huxley’s net pay was reduced to $0.

Huxley filed an action under the Wage Payment Act in June 2014 seeking recovery of the full $1,102.97 he claimed Godby owed him, plus twice that amount in liquidated damages and attorney fees. In its response, Godby alleged that Huxley owed it nearly $2,400, including $1,000 he was required to pay after getting into an accident with a company truck, and tools, uniforms and a phone charger he did not return to the company. Further, Godby argued that Huxley’s actions constituted theft, so it was entitled to treble damages and attorney fees.

Huxley moved for summary judgment seeking only $986.71, and Godby’s attorney offered to consent to judgment against it for the WPA claim in the base amount of $762.04 plus liquidated damages for a total of $2,286.12. Huxley refused the offer, and at a subsequent hearing the Marion Superior Court granted his motion for summary judgment on the WPA claim, awarding him the base amount of $986.71, plus twice that in liquidated damages and attorney fees of nearly $6,800.

On its counterclaim, Godby was awarded $1,557.73 for the tools, uniforms and phone charger, but did not award the $1,000 insurance deductible, treble damages or attorney fees. Godby appealed, arguing first that under WPA, Huxley was owed only $762.04 in net wages after deducting taxes and other “voluntary” deductions.

The Indiana Court of Appeals agreed that Godby was required to withhold mandatory taxes, but Judge Michael Barnes noted that the company gave no citation of authority for its “voluntary” deductions in the amount of $226.32 and, thus, waived any claim to deduct that amount.  

Although Godby was entitled to withhold $114.61 in mandatory tax deductions, Barnes also noted that Huxley only sought a base amount of $986.71 in wages, thus conceding that Godby properly took deductions from his $1,102.97 gross pay. However, those tax and deductions don’t square with the deductions Godby believes it is entitled to, Barnes wrote.

To remedy that issue, the appellate panel reversed summary judgment to Huxley to the extent he was awarded the full $986.71 without tax deductions and remanded for a calculation of that amount, taking into account that $10.88 for taxes has already been deducted.

The panel further held that because there was conflicting evidence as to whether Huxley was at fault for the truck accident, the trial court did not err in declining to award Godby the $1,000 insurance deductible. Similarly, Barnes wrote that because Godby “improperly attempted to turn contract-related disputes with a former employee into a criminal matter…(t)he trial court properly rejected Godby’s request for treble damages and attorney fees.”

However, the appellate panel also held that Huxley was not entitled to appellate attorney fees with respect to Godby’s counterclaim because its arguments were not “so entirely lacking in merit or cogency that they indicate bad faith or frivolity.” Instead, the panel remanded the issue to the trial court to make a fair calculation of the appellate attorney fees Huxley is entitled to based only on his WPA claim.

The case is GHPE Holdings, LLC, d/b/a Godby Heating Plumbing Electrical v. Jason Huxley, 49A02-1601-PL-164.

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