Your company's mandatory employee purchase policies could be costing you millions
A federal appeals court has clarified how mandatory wage deductions for employee purchases impact employer liability, reversing Jack in the Box on payroll practices.
The Ninth Circuit's decision in November settles a class action lawsuit that began in 2010 and involved roughly 5,105 former employees. The case challenged three workplace practices: deductions for Oregon's Workers' Benefit Fund, unpaid interrupted meal periods, and mandatory non-slip shoe purchases. The appeals court ruled against the company on the payroll deduction practices while upholding the dismissal of the meal break claims, sending two issues back for new trials.
The shoe deduction claim offers perhaps the most instructive lesson for HR leaders. Jack in the Box required employees to purchase non-slip shoes from Shoes for Crews to reduce slip-and-fall injuries, a workplace safety goal that sounds entirely reasonable. The problem emerged in the financial structure. The company negotiated rebates of two dollars per shoe and secured indemnity agreements protecting itself from liability. Over the relevant period, this arrangement generated more than one million dollars in rebates and nearly three hundred thousand dollars in indemnities for Jack in the Box.
The lower court approved these deductions because they allegedly benefited employees. The Ninth Circuit disagreed, finding that a jury could reasonably conclude employees...
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