Utah: Withhold, But at Your Peril

In a 3-2 decision, the Utah Supreme Court recently upheld an employer’s right, if warranted, to unilaterally and preemptively withhold an employee’s earned wages under a provision of the Utah Payment of Wages Act (UPWA), which states: “An employer may not withhold or divert part of an employee’s wages unless … the employer presents evidence that in the opinion of a hearing officer or an administrative law judge would warrant an offset.” Utely v. Mill Man Steel (Utah 2015).

The majority opinion said that although an employer may withhold and then seek a post-withholding opinion of a court or administrative law judge that the offset was warranted, the employer “does so at its peril. If the offset is not found to be warranted, the employer will be subject to liability and penalties under the UPWA.” Criminal liability and penalties could even be imposed on the employer (but not on its managers, who are not “employers”).

In this case, the employer fired a commissioned salesperson due to missing inventory that had arguably been under his control. The employer retained unpaid commissions owed the ex-employee to offset its losses. The ex-employee sued the employer for breach of contract and violation of the UPWA. Reversing summary judgment for the employee, the Supreme Court remanded the case to the district court to determine, for example, whether the employer presented evidence that would warrant an offset sufficient to justify withholding the ex-employee’s unpaid commission. The dissenting opinion said the employer should have been required to present evidence before withholding wages from the ex-employee.