Posted on August 29th, 2019
Below is a full transcript of this video.
How’s it going, fellow entrepreneurs? Today I wanted to talk about loans to employees. It’s not illegal. You certainly can do it.
But my position is just have a zero-tolerance policy for that. I think it should be in your handbook that you don’t give loans under any circumstances, just simply because I see that it causes more problems than not.
And usually, those problems are for the employer. For example, you give a loan to an employee, and then… And these are examples that have that I’ve come across, actually.
So you give a loan to an employee, and then what happens when they don’t pay you back? Suddenly there’s a problem between you and the employee. And if you’re in California, well, you know that’s not going to turn out well for you.
The bigger problem, though, is that a lot of times, employers will give loans to their employees with the agreement that they’ll be taking it out of their check, whether it’s payments or it’s one lump sum later on.
Unfortunately, this always causes problems too, because California is very strict about any deductions made to employees’ paychecks. The way California views it is that earned wages are the employees’ personal property. And so you have to have a writing to indicate that you’re going to deduct. So there are very few things that you can legally deduct from an employee’s paycheck.
Obviously, taxes or garnishments or anything that the law itself provides, but everything else has to be done in writing. And it’s revocable. So best case scenario is they pay you back.
I don’t see the incentive for that unless you’re getting interest or something. And then the worst-case scenarios are they don’t pay you back and you have a problem, or if you don’t have it in writing or you didn’t do everything absolutely correctly, then they sue you for deducting from their paycheck.
So in my opinion, just don’t do it. It’s not worth it. There just isn’t any reason to do it. All right, well, until next time, you guys have a great rest of the day.
