What is the impact of charging teachers for lost, damaged, or stolen equipment? State of Arizona school districts are continually faced with the dilemma of low funding.  On an annual basis school districts must make the most out of the small amount apportioned in order to pay employees, provide an enriched learning environment for students and purchase or repair equipment.  When a school district teacher loses or damages a piece of school district equipment the unanticipated costs can be devastating to the school district’s budget.  Equally, if a school district teacher steals a piece of equipment or has a piece of equipment stolen those costs can seriously impact the school district’s budget. This article seeks to identify the circumstances under which the Fair Labor Standards Act permits a school district to deduct the costs of lost, damaged, or stolen equipment from a school district teacher’s compensation without incurring additional costs or penalties.  Please note that the area of Fair Labor Standards Act compliance is nuanced and subject to a case-by-case analysis.  A school district is strongly encouraged to contact its attorney with any question relating to the subjects addressed in this article.

School district employees generally fall into the categories of certificated teachers, certificated administrators, and classified employees.  The Fair Labor Standards Act provides, amongst other things, that certain employees must be paid a minimum wage and be eligible for overtime pay.  The Fair Labor Standards Act goes further to provide exemptions from the minimum wage and overtime pay requirements and those exemptions may apply to certain categories of school district employees.

Most of the “exempt” categories of school district employees must pass certain tests in order to maintain the exemption from the Fair Labor Standards Act minimum wage and overtime requirements.  Those tests, generally speaking, are the duties test, the salary level test, and the salary basis test.

The duties test requires that the employee for whom the exemption is sought actually perform the duties of the applicable exempt position.  There are three main categories of exempt job duties referred to as executive, professional, and administrative.  Depending on which category of exemption is sought the duties that the employee is required to perform in order to be considered exempt from minimum wage and overtime requirements vary.  Only a case-by-case analysis of the employee with the school district’s attorney can provide accurate guidance.

The salary level test provides that most, but not all, categories of exempt employee positions (again referring to the executive, professional, and administrative) must make a minimum annual salary or that employee will not be considered exempt from minimum wage and overtime pay requirements.  As of January 2016 that annual salary requirement is a minimum of $23, 600.00 per year ($455.00 weekly), but such amount is subject to change.

The salary basis test requires that most, but again not all, categories of exempt employee positions receive a guaranteed minimum amount of money in any week in which the employee performs work.  This amount does not need to equal the entire salary due to the employee in question, but there has to be an amount that the employee can reliably expect to receive on a weekly basis.  The guaranteed salary amount cannot be reduced unless the reduction is specifically authorized under the Fair Labor Standards Act.

If an impermissible salary reduction is made, then most likely that employee will not be considered exempt from minimum wage and overtime requirements for that pay cycle.  This requirement is only applicable to reductions in monetary amounts; requiring an employee to use banked leave for absences does not result in a monetary reduction in salary and therefore most likely will not violate the salary basis test.  It is worthy of note that there is no Fair Labor Standards Act sanctioned deduction from an exempt employee’s salary for lost, damaged, or stolen equipment.  This means that such a deduction may result in the exempt employee in question becoming subject to both minimum wage and overtime requirements, at least for the pay period in which the impermissible deduction was made.

School district teachers are considered exempt from the minimum wage and overtime pay requirements of the Fair Labor Standards Act under the “professional” categories of exemption found in Code of Federal Regulations (the “CFR”).   29 CFR §541.303(a) states that a teacher (for the purposes of the exemption) is defined to include “any employee with a primary duty of teaching, tutoring, instructing or lecturing in the activity of imparting knowledge and who is employed and engaged in this activity as a teacher in an educational establishment by which the employee is employed.”  It is worthy of note that this definition does not reference a need for a certificate and instead focuses on the actual duties of the employee in question.

Applying the salary basis test to a school district teacher it would be natural to assume that deductions for lost, damaged, or stolen equipment would be impermissible under the Fair Labor Standards Act and result in a loss of the teacher’s exemption from the minimum wage and overtime requirements.  However, school district teachers are subject to a further specific regulatory exemption which results in the teaching exemption not being subject to either the salary amount or the salary basis test.

In 29 CFR §541.303(d) it states that the “salary requirements”, in essence the salary basis and salary amount tests, do not apply to teachers.  What this means is that a school district could deduct the costs incurred as a result of lost, damaged, or stolen equipment attributable to the teacher and not then cost the district the benefits of that teacher’s exemption from minimum wage and overtime requirements.

The permissibility of such a deduction is not only founded on the exemption in the applicable regulations from the salary basis test requirement.  Other determining factors such as vested employment rights, contractual provisions, and applicable school district policy may also play a key role in determining the permissibility of the reduction in salary.  It is also important to note that there may be strong practical reasons for a school district to avoid implementing such deductions such as overall morale.  It is important that any school district that is contemplating a deduction from a teacher’s salary for lost, damaged, or stolen equipment work closely with its attorney in order to address any unique set of facts which affect the outcome of the school district’s decision.


This blog should be used for informational purposes only. It does not create an attorney-client relationship with any reader and should not be construed as legal advice. If you need legal advice regarding Impact of Charging Teachers for Lost, Damaged, or Stolen Equipment, or any other estate planning matters, please feel free to contact at  480.461.5300, log on to udallshumway.com,  or contact an attorney in your area. Udall Shumway PLC is located in Mesa, Arizona and is a full service law firm. We assist Individuals, families, businesses, schools and municipalities in Mesa and the Phoenix/East Valley.