Costumes Prove Costly for Disney Resorts

The company will pay $3.8 million for wage violations, including improper paycheck deductions for costumes

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Walt Disney Co.'s $3.8 million settlement with the U.S. Department of Labor (DOL) should serve as a reminder to employers to carefully review wage and hour laws before making deductions from employee paychecks for uniforms or other expenses.

A DOL investigation concluded that two Disney subsidiaries in Florida violated the minimum wage, overtime pay and record-keeping provisions of the Fair Labor Standards Act (FLSA). In addition to other missteps, the department found that Disney impermissibly paid some employees less than minimum wage after payroll deductions were made for costume costs.

"These violations are not uncommon and are found in other industries, as well," said Daniel White, district director for the Wage and Hour Division in Jacksonville, Fla. "Employers cannot make deductions that take workers below the minimum wage and must accurately track and pay for all the hours their employees work, including any time they work before or after their scheduled shifts." 

The settlement will provide back pay to 16,339 employees of Disney Vacation Club Management Corp. and Walt Disney Parks and Resorts U.S. Inc.

[SHRM members-only toolkit: Managing Employee Dress and Appearance]

The Disney resorts could have been on the hook for more than just federal law violations if the properties were located in a different state, according to Tom Luetkemeyer, an attorney with Hinshaw & Culbertson in Chicago.

Florida law allows employers to require workers to purchase uniforms—except in certain situations involving day laborers. But that's not the case in all states.

State-by-State Evaluation

Deductions for supplying and cleaning uniforms are permissible under the FLSA as long as an employee's earnings don't fall below the minimum wage. However, state laws vary significantly.

In order to deduct for uniform costs in many states, there must be a written agreement between the employer and the worker that authorizes the deductions, Luetkemeyer explained.

That's the case in Illinois, for example, where an employee must voluntarily sign a written agreement at the time the deduction is made. For regular payroll deductions, the written agreement must:

  • Outline the time period for the deductions.
  • Provide for the same amount to be deducted each period.
  • Allow for voluntary withdrawal for the deduction.

Other states, like California, do not allow uniform deductions at all. The California Labor Code says employers that require uniforms must pay the price—and an employer directive to wear "apparel and accessories of distinctive design and color" counts as a uniform.

Some state laws are more nuanced. In New Jersey, for example, an employer can only pass along the cost of a uniform if the uniform is suitable for street wear or use at another establishment. That means shirts bearing the company's logo would have to be supplied by the employer.

Moreover, if New Jersey employees are required to "furnish more than one style, type or color of clothing during any one year," they must be compensated for the additional purchases. Employers in the state are also expressly required to pay for and maintain uniforms of cooks, dishwashers and other kitchen workers.

In some states, clothing must be certain neutral colors—like black, tan or white—if an employer wants to avoid responsibility for the cost.

Penalties for violations also vary from state to state but can include interest payments and fines payable to the state department of labor, Luetkemeyer noted.

Businesses need to think about the net impact of making deductions from workers' pay, he said, adding that employers should make sure they don't ignore these state laws, which may be far more onerous than federal law.

 

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