Can a Club Automatically Deduct League Fines from a Coach’s Paycheck?

It is well known that leagues enforce rules and standards through fines and penalties. This blog explores the following scenario: When a league issues a fine to a player or coach, can the league (or club) automatically deduct this fine from the coach paycheck?

In order to conduct a proper analysis, there are three facts that must be confirmed: Where does the individual work? Where is the club located?

EACH STATE HAS ITS OWN WAGE PAYMENT AND COLLECTION LAW

In order to figure out if an automatic deduction of a league fine/penalty is lawful, we must turn to the applicable state law on the issue. There is no federal law that governs payroll deductions. Rather, each state has its own law that covers lawful payroll deductions.

So, the first step is to confirm where the indivdual is working. For the purposes of this blog, we will look at three states’ wage payment and collection laws: (1) Pennsylvania, (2) New York and (3) New Jersey.

PENNSYLVANIA (PA)

The Pennsylvania Wage Payment and Collection Law (WPCL) and its corresponding regulations identifies the following lawful payroll deductions:

  • Contributsion authorized in writing or in a collective bargaining agreement (CBA) for health insurance, life insurance, hospitalization insurance and the like.

  • Conributions or recovery of overpayment from certain welfare or pension plans.

  • Contributions authorized in a collective bargaining agreement (“CBA”) for thrift plans, stock plans, or purchase plans.

  • Deductions authorized in writing by employees for payments into personal savings accounts, or other accounts/plans such as: (1) credit union, (2) savings fund, (3) vacation/savings, (4) government bonds.

  • Contributions authorized in writing for a charitable purpose, or local area development opportunities.

  • Standard deductions (Social Security, state and federal income tax)

  • Deductions agreed upon in writing or in CBA for purchasing or replacing equipment.

  • “Such other deductions authorized in writing as in the discretion of the Department [Department of Labor] is proper and in conformity with the intent and purpose of the WPCL.”

PA THOUGHTS: Absent an authorization from the Pennsylvania Department of Labor, automatic deductions for league fines are impermissible.

NEW JERSEY (NJ)

The New Jersey Administrative Code (NJAC) lays out 9 categories of lawful deductions:

  • Contributions authorized in writing (including a CBA), to employee welfare plans, insurance, hospitalization, medical/surgical, pension, retirement, profit sharing plan, retirement annuity;

  • Contributions authorized in writing (including a CBA) for payment into a company thrift plans, security options, and security purchases.

  • Payments authorized by the employees for payment into employee personal saving account, vacation, or savings funds.

  • Payments for company products purchased

  • Charity contribution

  • Payments (authorized by employees) or their union for uniform rental, laundering and the like;

  • Labor dues and initiation fees

  • Payments atuhorized in writing (CBA or otherwise) for healthcare membership fees or child care services.

  • “…such other contributions, deductions and payments as Commissioner of Labor and Workforce Development may authorize by regulation as proper and in conformity with the intent and purpose of the Act, if such deductions are approved by the employer.”

NJ THOUGHTS: Absent authorization from the NJ Commission of Labor and Workforce Development, automatic deductions for league fines are impermissible.

NEW YORK (NY)

NY Labor Law idenfies the following categories of lawful deductions so long as they are expressly authorized in writing by the employee:

  • Deductiosn for insurance premiums and prepaid legal plans

  • Pension health and benefits

  • Contributions and certain purchases to a bona fide charitable organization

  • Purchase of U.S. Bonds

  • Deductions for fitness center costs, day care, discounted parking and the like.

  • Labor dues

  • Tuition

  • Recovery of overpayments

  • Deductions made in conjunction with an employer sponsored pre-tax contribution plan.

NY THOUGHTS: The NY law does not have the “catch-all” term like NJ and PA. It follows that automatic deductions for league fines are impermissible.

WHAT CAN CLUBS AND COACHES/PLAYERS DO?

So what does a Club do when they cannot automatically deduct the fines/penalties, but they need to make sure they remain a good actor in the league? There are many ways to craft contract terms, and it is useful to first assess the needs of both parties.

CLUB INTERESTS:

  • Being a Good Actor Within the League. The Club has an interest and obligation to ensure that its coaches and players are paying league fines and abiding by the league policies. The Clubs want to be a good actor within the League.

  • Compliance with Wage Payment and Collection Law. Clubs (just like any employer) have an interest in abiding by the state and local wage payment laws. Depending on the state, violations of such laws carry liquidated damages and attorneys fees.

COACH/PLAYER INTERESTS:

  • Being a Good Actor Within the League. The Coach/Player (“Employee”) also has an interest in being a “good actor” within the league.

  • Advocacy. The Coach also has an interest in advocating for themselves. Depending on the league, there may be a mechanism by which the employee can appeal the fine. Even more, the Employee paying the fine themselves, keeps the Employee in control over their paycheck. This is precisely the sprit of the sate wage payment laws.

BOTTOM LINE: There is a strong argument that automatic deductions for league fines are unlawful, thereby not the solution to address the above referenced needs of the Club and League.

As with anything in law/business, there is no one way to resolve these scenarios. There are multiple avenues to explore when drafting a term that satiate the needs of the Club, the Employee (“coach”) and the League. With that being said, one path worth exploring would be to make payment of league fines a term and condition of employment.

Let’s do a quick recap of executive employment contracts. Most executive employment contracts include the same basic sections. There certainly more terms that can be included but for the purposes of this blog, we’ll focus on the basic terms below:

  • Term (duration)

  • Compensation

  • Benefits

  • Duties of the Executive

  • Termination

    • For Cause

    • No Cause

    • Mutual Termination

  • Dispute Resolution

Duties of the Executive. In order to appease the Club, the League and the Coach, a quick fix would be to make timely League fine payments a duty of the Coach. In other words, in the Job Description, in addition to all of the football related duties, another duty is to “timely payment or response to league fines.”

Failure to Pay a Fine Would Be a Breach of the Contract and Result in “For Cause Termination.” Now, should the coach not pay a league fine (despite it being a term of employment), the club can find the employee in breach of the contract. This breach of contract could be a reason to terminate the employment (aka- For Cause Termination).

Briefly, most executive contracts include terms on how the contractual relationship can end. Usually, there are four scenarios contracted for: (1) For Cause (employee did something wrong), (2) Mutual Termination (both agree to part ways), (3) No Cause (Club just wants a new coach).

A “For Cause” termination usually outlines the scenarios where the club can terminate the Coach because they did some type of “bad action.” Most contracts list the scenarios that would result in a “For Cause Termination.” Such scenarios include, but are not limited to, conviction of a felony, fraternizing with subordinates, and “failure to perform job duties.” Clubs can keep this catch all language or explicitly state “failure to pay or address league fines will result in ‘For Cause’ Termination.”

The bottom line is that Clubs need to be aware of their respective states’ wage payment and collection laws. Even more, agents must be aware that these laws exist and seek counsel to ensure that their clients are signing contracts with lawful terms.

Susie Cirilli