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Nevada Supreme Court Rejects Labor Commissioner's Interpretation of New Law Concerning Wage Deductions

Volume 1, Issue 4
Winter 2001

On November 15, 2001, the Nevada Supreme Court provided a long anticipated win for employers by flatly rejecting the Labor Commission's interpretation of Nevada's wage deduction statutes in a case where The Orleans Hotel and Casino sought to deduct cash shortages from a casino cashier's pay.

A casino cashier filed a wage claim with the Nevada State Labor Commission, after her employer deducted money from her wages for shortages in her cash drawer. Following an investigation, the Labor Commission issued a determination ordering the Hotel to both repay the sums deducted and to pay a penalty. The employer challenged the Labor Commission's determination.

The Court noted that Nevada Revised Statute 608.110 (1) permits an employer to withhold from the wages or compensation of any employee any dues, rates or assessments becoming due to any hospital association or to any relief, savings or other department or association maintained by the employer or employees for the benefit of the employees, or other deductions authorized by written order of an employee. For many years, the Labor Commission has interpreted NRS 608.110 (1) to mean that all withholdings, even those authorized by written order of an employee, must be for the employee's "benefit". As deductions such as those for a cash shortage do not benefit the employee, the Labor Commission determined such deductions were illegal and prosecuted offending employers. However, contrary to the Labor Commission's interpretation, the Nevada Supreme Court found that the plain language of the statute does not mean that deductions authorized by an employee are limited to just those "for the employee's benefit", a phrase that precedes the "other deductions authorized by the employee" portion of the statute and separated by a comma and the disjunctive word "or". Thus, the Court concluded that NRS 608.110(1) permits an employer to withhold amounts equivalent to cash shortages from an employee's wages as long as the employee has authorized the withholding in writing.

The Court then turned its attention to the validity of the written authorizations used in the case. The Orleans had a practice of requiring all new employees who handled cash to sign a form acknowledging the Orleans' policy of withholding cash drawer shortages from employees' payroll checks. Agreeing with the Labor Commission hearing officer, the Nevada Supreme Court ruled that pre-loss or blanket authorizations are not a knowing and intelligent waiver of employees' right to receive full pay. It held that language in the pre-employment forms describing the conditions of hire and agreements regarding cash shortage reimbursements cannot authorize deductions for cash shortages that may or may not occur in the future.

However, the Orleans also required employees to sign separate shortage slips authorizing the Hotel to withhold the specific shortages from an employees' pay after a shortage is discovered. The Court found that the casino cashier signed such authorizations voluntarily, despite her argument that she signed these shortage slips involuntarily because she feared termination. The Court explained that employees in Nevada are presumed to be employed "at-will", giving employers the right to discharge an employee for any reason, subject to limited public policy exceptions. Quoting the New Jersey Court of Appeals, the Court held that a policy of holding employees liable for their shortages does not contravene public policy or established law because shortages are almost invariably due to the negligence or dishonesty of the employee, and it is a fundamental rule in the law of agency that an employee is generally liable to the employer for loss sustained by the employer due to the employee's negligence or misappropriation. Thus, the Court ruled that an employer can require an at-will employee to reimburse the employer for losses caused by the employee and terminate an employee who refuses to agree to the reimbursement.

Lastly, the Labor Commission hearing officer had determined that there was insufficient evidence to establish that the specific employee was responsible for the shortages, inferring that the Orleans was essentially requiring employees to insure it against losses. The Nevada Supreme Court agreed that employees cannot be required to insure their employers against losses, but found that the Orleans had "a reasonable basis" for determining this employee was responsible for the cash shortages and that its determination that she was responsible for the cash shortages was not arbitrary.

While a great victory for employers, all those wishing to avail themselves of this new ruling should remember two things: (1) deductions must be subject to written authorization from the employee for that specific deduction (and not "blanket"), along the lines of the policy and forms used in this decision, and (2) the employer must be able to show a "reasonable basis" for concluding that the particular employee was responsible for the loss.

Coast Hotels and Casinos, Inc., v. Nevada State Labor Commission, 117 Nev. Adv. Op. No. 68 (November 15, 2001).

Employer Report articles are for general information only; they are not intended and should not be construed to be legal advice. Reading or replying to such articles does not establish an attorney-client relationship. In addition, because the subject matters and applicable laws discussed in Employer Report articles are often in a state of change and not always applicable to every type of business entity or organization, readers should consult with counsel before making decisions based on the same.