Written by: Stephen W. Lyman
A Common Scenario
Sometimes, as a matter of convenience, an employee may request that a portion of his or her paycheck be deducted and applied toward a debt or other obligation. For example, the employee might ask that insurance premiums be deducted – or charitable contributions – or the cost of purchases from the employer. To accommodate the employee’s request, an employer will often oblige and make the deduction as requested.
Everyone is happy – – but is the deduction legally valid? Maybe not.
In order to be valid, an employee wage deduction in Indiana must meet several very important and technical requirements. Any deduction that fails to meet one of these legal requirements can be void. A void wage deduction could mean that the employer failed to pay the full amount of an employee’s wages when they were due. An employer’s failure to pay wages when due can run afoul of another Indiana law – the Wage Payment Statute (I.C. 22-2-5-1). A violation of this statute can result in liability for three times the amount of wages improperly deducted, plus attorney’s fees and the costs of collection.
Make sure your employee wage deductions are valid and avoid being surprised. Here is what you need to remember.
Employee Wage Assignments in Indiana
Under Indiana law, an employer may withhold portions of employee paychecks only under limited conditions, and only for certain statutorily prescribed purposes. Such a withholding by an employer is known as a wage assignment, and is governed by the Indiana Wage Assignment Statute (I.C. 22-2-6-2).
Meeting the Legal Requirements
To be valid, an employee’s wage assignment must satisfy all of the requirements listed in the statute. They are:
- Writing. The assignment must be in writing.
- Personally Signed. The employee must personally sign the assignment document.
- Revocable. The assignment must state by its terms that it is revocable at any time by the employee by giving written notice to the employer.
- Employer Consent. The employer must agree to make the deduction.
- Delivery. An executed copy of the assignment document must be delivered to the employer within ten days of its execution.
- Thirteen Specific Purposes. Valid deductions can only be made for the purpose of paying any one of the following:
- Premium on an insurance policy obtained by the employer for the employee;
- Pledge or contribution of the employee to a charitable or nonprofit organization;
- Purchase of bonds orsecurities, issued or guaranteed by the United States;
- Purchase of stock of the employer;
- Dues owed to a labor organization of which the employee is a member;
- Merchandise sold by the employer to the employee, at the written request of the employee;
- Payment of a loan made to the employee by the employer, as evidenced by a written instrument executed by the employee, and subject to a specific weekly limit;
- Contributions of the employee to a hospital service or medical expense plan, or to an employee’s association, trust, or plan existing for the purpose of paying pensions or other benefits to the employee or others designated by the employee;
- Payment to any credit union, nonprofit organization, or association of employees;
- Payment to an employee’s direct deposit account;
- Premiums on policies of insurance and annuities purchased by the employee on the employee’s life;
- Purchase of shares or fractional interests in shares in one or more mutual funds;
- A court judgment owed by the employee made in accordance with an agreement between the employee and the creditor, but is not a legal garnishment.
There’s More – Recovering Overpayment of Wages
Suppose you find out that the employee has been overpaid by mistake. How can the employer recover the amount of the overpayment when recovery of overpayments is not among the listed purposes? Indiana law addresses this issue.
If an employer has overpaid an employee, the employer may deduct the amount of the overpayment, but only if:
- The employer gives the employee two weeks advance notice;
- The amount of overpayment is not in dispute; and
- The deduction is not more than the lesser of: (a) 25% of the employee’s disposable earnings (essentially take home pay) for the pay period, or (b) the amount of disposable earnings for the period that exceeds thirty times the federal minimum wage (i.e. 30 x $7.25 = $217.50).
Not an Assignment of Wages. The employer does not need to comply with the formalities of a written wage assignment because the law specifically states that recovery of overpayment of wages is not a wage assignment.
The Misplaced Decimal Point. The employer does not even need to meet these restrictions if there has been a single gross overpayment of wages equal to ten times the employee’s gross wages earned due to the inadvertent misplacement of a decimal point. In that case, the law allows the entire amount of the overpayment to be deducted immediately.
Things to Remember . . .
- Because all wage assignments must be in writing, signed by the employee, and be revocable by its terms – Consider developing a standard “Wage Deduction Authorization” form to be used every time an employee wage deduction will be made.
- Deducting for damaged or lost employer property is not specifically permitted. Consider developing a form that would convert the obligation to pay for lost or damaged property into an “Employee Request for Purchase of Merchandise.”
- The deduction for a “fine” from an employee’s paycheck is not permitted.
- Deductions for the payment for “services” of the employer are not specifically permitted. Consider converting the employee’s obligation to pay for the purchase of services into a loan to the employee (which is specifically permitted, see purpose #7) by having the employee execute a promissory note – and then deducting the loan payments from the employee paycheck.
- The payment to “nonprofit organizations” is permitted. This may allow for the deduction for the payment of services directly to the employer if the employer is a “nonprofit organization.”
- There are specific limitations on the amount of an employee’s paycheck that can be taken through a deduction for the repayment of a loan. Those limitations are the same as the limitations set out for the recovery of an overpayment of wages.
- The employee can revoke the deduction authorization at any time, in writing. Don’t deduct after the employee gives the revocation notice.
If you have questions regarding this topic, please contact Steve Lyman at 317.977.1422 or firstname.lastname@example.org or your regular Hall Render attorney.
Assignment - How to Legally Transfer Your Rights
What Assignment Is
Assignment is the transfer of rights or interests in a property. An assignment agreement is a document that assigns rights or interests in a property. Assignment of rights over all kinds of property is not recognized by law. For example, assignment of future income is not recognized by law although assignment of future income is recognized in equity. Assignment of residential rental is recognized only if the landlord of the residential premises gives written consent for assignment of such rental. If a partnership agreement does not restrict an assignment, a partnership interest can be assigned. Assignment of mortgage is recognized in many states but in order to be valid, the mortgage must be executed according to law and mortgage assignment must be in writing and recorded. Lease assignment is valid but an assignment of the lease does not release the original assignor. Cash flow assignment is another type of assignment. A borrower can validly assign his customer accounts to a lending institution for receiving a cash flow advance. An assignment of agreement is valid. It will result in the assignment of rights to receive benefits accruing from that agreement to the party to the contract.
How to Create an Assignment
An assignment agreement must contain all the basic principles of a valid contract such as free consent, consideration, and capacity of parties. Special words or special forms are not necessary in order to validate an assignment. Any statement that shows an intention to assign a property constitutes valid assignment. An assignment form permits assigning all of an assignor's interest in a particular property to an assignee. By signing assignment forms, owners guarantee that the interest or title assigned is free of liens, claims or encumbrances of any kind. One can prepare an assignment deed with the help of an assignment sample form.
For assignment of deeds to be valid, they must be signed by the parties. In the case of partnerships, an assignment agreement must be signed by a general partner. For LLC assignment, the deed must be signed by a manager of the LLC. In a business entity, the assignment deed must be signed by an officer of such an entity.
Intellectual Property Assignment
Intellectual property rights can also be assigned and this includes patents, copyrights, trademarks and trade names. Patent assignment is the transfer of ownership and rights of inventors over a patent. Assignment of patents is governed by federal law as well as international treaty procedures for intellectual properties, such as procedures under patent cooperation treaty (PCT). The U.S. Patent and Trademark Office (USPTO) records every assignment of patent rights. For this, all information stipulated in the patent laws must be submitted to the USPTO. However, the USPTO does not specify any particular patent forms. One can prepare a form of assignment of a patent with the help of a sample assignment form.
Assignment of copyright is the transfer of interest over a copyright. By copyright assignment, the owner of a copyright transfers to another person the owner's rights and other interest over the copyright. For transferring rights over a copyrighted work, the parties may sign copyright forms for assignment or enter into a copyright permission agreement. Copyright permission is a request to include copyright substance in other person's work. One can prepare a form of assignment of copyright with the help of a sample assignment form.
Both trademark and trade name rights can be assigned. Trade name is the official name of an entity under which the entity carries on business and trademark is the word or symbol used to identify and distinguish the goods and services of that entity. The owner of a trademark/trade name can transfer his ownership of trademark to another person or entity by assignment. By assigning a trademark, the owner transfers to the other party owners' title, rights, and interest in the trademark. Additionally, assigning a trade name/trademark also relinquishes other rights attached to that trade name, including its logo, and goodwill. Trade name assignment can be done for registered as well as unregistered trade names. In a trademark assignment, the rights and title to the trademark are always transferred along with the goodwill associated with the mark. One can prepare a form of assignment of trademark with the help of an assignment form template.
See also Assignment of Lease, Assignment of Trademark, Assignment of Mortgage, Assignment of Accounts, Assignment of Copyright
Assignments - FAQ
My friend offered to assign me his residential rental. What does that mean?
The process of subletting a rental property to another is called lease assignment. A person can sublet a leased residential property with permission of the landlord. An assignment of lease is effectuated by signing a lease assignment agreement. The person receiving the rights is called assignee and the person transferring the rights is called assignor. Even when the property is assigned to a third person, the original lessee will be liable to the property owner.
Can I transfer my copyright to another?
Yes, you can transfer your copyright to another. This is called assignment of copyright. It is commonly used in transfer of intellectual property rights. Intellectual property rights such as patents, copyrights, and trademarks need to be assigned in writing and duly signed by both the parties. These assignment agreements transfer the right to use, alter or manipulate the intellectual property rights, from its original owner to the assignee. By transferring a copyright, you can ensure future income in the form of royalties. Copyright permission is granted by entering into an assigning contract. US Legal Forms provides many professional yet affordable copyright forms, including a free sample preview available for an assignment form.
I received a notice from my bank about assignment of mortgage. What does this mean?
A mortgage assignment is the process by which a mortgage is transferred from one entity to another. It usually happens between banks or similar financial institutions when one person continuously defaults on mortgage payments. To free cash flow, the lender bank may enter into an assignment of agreement of mortgage with the buyer bank. The buyer bank wins the right to collect money from the mortgagee. This is also called assignment of deed of trust. In assignment of mortgage, the assignor bank is not obliged to get permission from mortgagee. It is up to the buyer bank that the mortgagee is informed of the assignment.
I have an ownership interest in an LLC, engaged in commercial trade. Can I transfer my interest?
A limited liability company interest is considered private property. It can be completely or partially assigned to another in accordance with the LLC agreement. Contrary to other assignments, this will not include assignment of rights to take part in an LLC's management of the business and affairs, except otherwise provided by the agreement. An assignment similar to LLC assignment is also possible in a partnership agreement. However, similar clauses to that effect should be included in the partnership deed.
Can I sell my trademark?
Your trademark rights can be transferred to another through trademark assignment. By assigning a trademark, the right of future use of the trademark will be transferred to the assignee. Trademark assigning or assigning a trade name is done by completing and signing an assignment form. It should include the name and address of the assignor, as well as the assignee, and the trademark particulars. The trade name assignment form shall also contain a statement to the effect that the trademark shall not be used for any purpose other than that stated in the agreement. Many professionally drafted assignment sample forms are available at US Legal Forms.
Can I partially assign my patent rights?
A patent is a collection of exclusive rights over inventions awarded to inventors as appreciation of their hard work. Patent assignment is possible for the complete set of rights or only a part interest. Partial assignment is a transfer of a specific part of the interest. This form of assignment can also be for using the patent rights only in certain countries. The way patent rights are to be assigned will be specified in the assignor's form of assignment. Partial patent assignment should be subject to regulations laid down by the Patent Cooperation Treaty. This treaty provides a unified procedure for applying for patents and to protect inventions of its contracting states. US Legal Forms offers a vast selection of first-quality sample patent forms, sample assignment forms and templates for patent assignment.