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When Employees Ask to Borrow Money

An employee borrowed several thousand dollars from her boss. He agreed to take $50 out of her check every two weeks. But he soon grew impatient with that rate of repayment. On his own, he later decided to take out as much as $600 each pay period. Upset, the woman asked me if that huge deduction was legal. It wasn’t. In many states employers must request employees’ written permission for deductions—except for taxes.

Even though her employer’s initial intentions were good, his frustrations got the best of him. To the employee he went from friendly banker to robber baron and she planned to take legal action. Both employee and employer should have heeded the time-honored advice: “Neither a borrower nor lender be.”