• David Martin

What Do I Do If... My Client's Employer Fails to Send in Deductions?


Every now and then a client has a problem which is outside your “wheelhouse.” This series provides practical guidance to attorneys on how they can help their clients on ERISA-related issues. 

So, your client says their employer deducted 401(k) contributions from their paycheck but did not send the money in. What do you do? Your client may only be out a small sum; however, they are rightfully upset. How can you help without running up fees which are more than the amount at stake?

Report it to the Department of Labor

If it happened with one employee, it may have occurred with several. It may be worth a call to the Department of Labor to report the issue and, more precisely, the Employee Benefits Security Administration (EBSA), which is part of the Department. Alabama residents should contact:

  • Atlanta Regional Office | 61 Forsyth St, SW, Ste 7B54 Atlanta, GA 30303 | (404) 302-3900.

The unlawful retention of employee deductions is not limited to 401(k) contributions, though that is one of the more common occurrences.


Deductions can also be mishandled involving other ERISA benefits such as premiums for healthcare insurance, life insurance, or disability insurance. EBSA can help with all such violations. The Department of Labor takes seriously such violations, and of course, it has the force of the government to act on behalf of employees at no cost to the client. In Scalia v. Sin City Inv. Grp., Inc., No. 2:19-CV-361 JCM (NJK), 2020 WL 3172997 (D. Nev. June 15, 2020), just such a violation occurred. The Department of Labor fully pursued the matter. The employer failed to respond to discovery and, as a result, a motion for summary judgment was granted in favor of the Department. Employers cannot use a nonconsensual “loan” from their employees.

Another matter to consider is whether the deducted but unpaid money caused the employee’s effective wage to dip under amounts due for overtime or minimum wage. There could also be a wage and hour violation. And, of course, it could have affected others. Again, the Department of Labor is interested in such matters. 

This is just one example of how knowing what to do can allow you to provide value to your client. Sometimes these types of issues turn into cases that need referring to a lawyer who regularly practices in the area. We can help. You can refer the matter and receive regular updates from us allowing you to continue the client relationship. We value our relationship with you just as you value your client relationship.

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