FLSA Anti-Kickback Rule: Employer Costs, Deductions, and Remedies

The FLSA anti-kickback rule, set out in 29 CFR § 531.35, says your wages have to reach you “free and clear.” If your employer makes you buy tools, uniforms, equipment, or other things that really benefit the business, and those out-of-pocket costs drop your effective pay below the federal minimum wage of $7.25 an hour or the required overtime rate in any workweek, the law treats the money you spent as if the employer took it back out of your paycheck. That’s the kickback. It’s illegal, and the remedy is usually double what you’re owed.¹

What “Free and Clear” Actually Means

Wages don’t count as paid unless you get to keep them. Under 29 CFR § 531.35, wages must be paid “finally and unconditionally.” When you have to hand part of them back, or spend them on something your employer should be paying for, that returned or spent amount is a kickback in the eyes of the law.¹

The regulation doesn’t care whether the money passes through the employer’s hands. If the company requires you to buy a specific tool from a third-party vendor, the cost still counts as a kickback to the employer. What matters is that the expense exists because the employer requires it and serves the employer’s business.

Costs That Belong to the Employer

The rule reaches any expense that primarily benefits the business rather than you. Federal regulations and Department of Labor guidance have filled in the categories over the years.

Tools and Equipment

Specialized tools, software, and equipment required for the job are the classic example. A construction worker forced to buy power tools, a delivery driver required to supply a GPS unit, a technician expected to bring their own diagnostic device — those costs sit on the employer’s side of the ledger. A 2024 DOL opinion letter confirmed the same treatment for employer-required cell phones, cameras, computers, and accessories, and said any reimbursement has to “reasonably approximate” the worker’s actual expenses. Employers can’t use inflated or deflated numbers to game the regular rate of pay.²

Uniforms and Their Upkeep

When a company requires clothing that isn’t suitable for everyday wear, the cost falls on the employer. Branded shirts, safety gear, industry-specific garments all qualify. And it isn’t just the purchase price. The cost of laundering or renting a required uniform is treated the same way, as a facility “primarily for the benefit or convenience of the employer.”³ A restaurant that requires a branded chef’s jacket and expects weekly dry cleaning is effectively cutting the chef’s pay by the cleaning cost.

The same category picks up safety caps, miners’ lamps and explosives in mining, electric power used for the employer’s production, company security, and transportation needed for the job itself.³

Remote and Hybrid Work Costs

The rule doesn’t stop at the office door. When your employer requires remote work and you’re paying for internet, a personal cell phone plan, or computer equipment to do the job, those costs get the same “free and clear” analysis. The DOL’s 2024 opinion letter addressed exactly this situation and reinforced that the answer is the same whether you’re in a warehouse or a home office.²

Shared-use costs like an internet or phone plan raise the practical question of how much of the bill is really for work. The regulations don’t set a formula. The DOL has said it “does not require or endorse a specific method to approximate employees’ expenses for reimbursement,” as long as whatever method the employer uses reasonably approximates the actual business-related cost.²

Travel Between Job Sites

Your regular commute is yours to pay for. Home-to-work travel isn’t work time, and the associated costs don’t fall on the employer. But travel between job sites during the workday is different. The DOL treats that as “all in a day’s work,” which makes it compensable time and puts the associated mileage, tolls, and parking under the anti-kickback framework.⁴

A home health aide driving from patient to patient, or a repair technician moving between service calls, is racking up business travel expenses. If the employer doesn’t reimburse and the unreimbursed cost pulls the worker’s weekly pay under the wage floor, that’s a violation. The trip from home to the first stop and from the last stop back home stays excluded.

Deductions for Damage, Shortages, and Losses

One of the most common violations is docking pay for things that go wrong on the job. The Department of Labor has been clear that employers cannot deduct any of the following if it would push your pay below minimum wage or your overtime rate:

Property damage, including broken equipment during normal work.
Cash register shortages at the end of a shift.
Customer nonpayment or walkouts.
Theft losses, even of company property.

These limits apply even when the loss came from your own negligence. Employers also can’t dodge the rule by asking you to reimburse in cash instead of running a payroll deduction. The DOL treats both the same way.⁵

When an Unreimbursed Expense Becomes a Violation

The rule doesn’t require reimbursement of every business expense. It cares whether the unreimbursed cost drops your effective pay below $7.25 an hour or the required overtime rate in a given workweek.⁶ The math is done workweek by workweek, not averaged across a pay period or a year.

If you earn exactly $7.25 an hour, any unreimbursed business expense at all creates a violation. There’s no room between your pay and the floor. A $15 required safety vest wipes out two hours of protected pay.¹

Higher earners have more cushion, but not unlimited. A warehouse worker at $18 an hour working 40 hours earns $720. The minimum wage for that week is $290. The employer could let up to $430 in expenses go unreimbursed before crossing the line. Push that same worker to 50 hours and overtime enters the picture. The 10 overtime hours must be paid at least $10.88 an hour, and unreimbursed expenses can’t eat into the overtime premium either.¹

Because the analysis is weekly, one big required purchase can create a violation in the week it happens even for a well-paid worker. A $500 laptop bought in week one counts fully against that single workweek’s wages.

States That Require More

The FLSA is a floor. Several states require employers to reimburse all necessary business expenses regardless of whether the worker’s pay stays above minimum wage. California, Illinois, Montana, North Dakota, and South Dakota all have statutes of that kind. In those states, a well-paid employee spending $200 a month on a work-required cell phone plan can demand reimbursement even though the expense doesn’t come near the federal wage floor. Other states and some cities have adopted similar rules as remote work has spread. Check your own state’s wage payment law before assuming the federal analysis is the whole picture.

Retaliation Is Illegal

Asking your employer to reimburse a business expense, or filing a complaint when they refuse, is protected activity. Section 15(a)(3) of the FLSA makes it illegal to fire, demote, cut hours, or otherwise punish a worker for making a wage complaint, participating in an investigation, or testifying in a related proceeding.⁷

The protection is broader than most workers realize. Oral complaints count, not just written ones. Most courts have held that internal complaints made directly to the employer are protected even if you never contact the DOL. And the anti-retaliation rule reaches former employees, so a bad reference given in retaliation for a wage complaint is still a violation.⁸

Available remedies for retaliation include reinstatement, lost wages, and liquidated damages equal to the lost wages, effectively doubling the recovery.⁹

How to File and What You Can Recover

You can file a complaint with the Department of Labor’s Wage and Hour Division online or by calling 1-866-487-9243. Bring your employer’s name and address, the name of a manager or owner, a description of your work, and details about how and when you’re paid. The nearest WHD field office will contact you within two business days to discuss whether an investigation is warranted.¹⁰

You can also skip the DOL and file a private lawsuit. Either way, the statute of limitations is two years from the violation, or three years if the violation was willful, meaning the employer knew or showed reckless disregard for whether its conduct was legal.¹¹

The main enforcement tool is liquidated damages, an amount equal to the unpaid wages. If an investigation finds $3,000 in unreimbursed expenses that should have been covered, the employer may owe $6,000: $3,000 in back wages plus $3,000 in liquidated damages. In a private lawsuit, the court must also award reasonable attorney’s fees and court costs.⁹

Employers have one out. If the company convinces a court that the violation happened in good faith and that it had reasonable grounds to believe its practices were legal, the court has discretion to reduce or eliminate the liquidated damages. The employer carries the burden of proving both elements, and courts apply the standard strictly.¹²

Keep your own records while you work. Save receipts for required purchases, pay stubs, written policies on equipment or uniforms, and any messages where your employer acknowledged or refused a reimbursement request. Employers are required to keep payroll records for at least three years and records of wage additions and deductions for at least two.¹³ When the employer’s records are incomplete or missing, courts tend to resolve the ambiguity in your favor.

1
eCFR. 29 CFR 531.35 – Free and Clear Payment; Kickbacks
2
U.S. Department of Labor. Opinion Letter FLSA2024-01
3
eCFR. 29 CFR 531.32 – Other Facilities
4
U.S. Department of Labor. Fact Sheet 22 – Hours Worked Under the Fair Labor Standards Act
5
U.S. Department of Labor. Fact Sheet 16 – Deductions From Wages for Uniforms and Other Facilities Under the FLSA
6
U.S. Department of Labor. Minimum Wage
7
Office of the Law Revision Counsel. 29 USC 215 – Prohibited Acts
8
U.S. Department of Labor. Fact Sheet 77A – Prohibiting Retaliation Under the FLSA
9
Office of the Law Revision Counsel. 29 USC 216 – Penalties
10
Worker.gov. Filing a Complaint With the Wage and Hour Division
11
Office of the Law Revision Counsel. 29 USC 255 – Statute of Limitations
12
Office of the Law Revision Counsel. 29 USC 260 – Liquidated Damages
13
eCFR. 29 CFR Part 516 – Records to Be Kept by Employers