Question

An employee is permitted by her employer, a new car dealership, to use a selection of the dealer's cars as a company car. The employer's rationale is that having the employee be familiar with the features and handling of the dealership's stock of cars would help her be more effective in selling the cars, even though all of the miles put on these vehicles by the employee are personal miles.

The employer deducts the value of the use of these cars from the employee's paychecks, dropping the employee's cash pay below the minimum wage. Is this legal under Section 3(m) of the Fair Labor Standards Act (FLSA)?

Answer 1

Deductions from an employee's pay for the personal use of a company vehicle that reduce the cash wage below the minimum wage may be illegal under Section 3(m) of the FLSA. Employers must ensure that their employees' earnings do not fall below the minimum wage after such deductions.

Step-by-step explanation:

The question addresses the legality of an employer deducting the value of the use of a company car from the employee's paychecks under the Fair Labor Standards Act (FLSA), especially when such deductions drop the employee's cash pay below the minimum wage. According to Section 3(m) of the FLSA, there are specific provisions regarding what constitutes wages which generally include the regular cash wage and the reasonable cost to the employer of furnishing the employee with 'board, lodging, or other facilities' if they are primarily for the benefit and convenience of the employee. However, the FLSA requires that an employee's earnings at least equal the minimum wage, and if deductions bring the cash wage below that level, it would likely not be compliant with FLSA regulations.

Employers must adhere to minimum wage laws unless specific exemptions apply. It is crucial that deductions for the personal use of a company vehicle do not reduce an employee's earnings below the required minimum wage. The scenario described may be at odds with regulations, and the employer might be acting against the protections offered by the FLSA to the employee, making such a deduction potentially illegal.