Employers may loan or advance their employees money to be repaid from wages. The interest rate on a loan to an employee may not exceed 8 percent per year LA Rev. Stat. Sec. 23:691.
An employer that charges more than the 8-percent limit forfeits its right to any interest and may not deduct any interest on a loan the employee owed to the employer from an employee's paycheck, although it could deduct the principal (La. Rev. Stat. Sec. 9:3501; Richard v. Vidrine Auto. Servs., Inc., 729 So. 2d 1174 (La.App. 1 Cir., 1999)).
In addition, an employer that charges more than 8 percent interest on a loan to an employee may be fined between $25 and $100 or imprisoned for not more than 3 months, or both.
Before making a wage advance or loan to an employee, it is advisable to require the employee to agree in writing to a specific, realistic repayment schedule. Written authorization to deduct the payments from the employee's wages should be obtained. In addition, the employer should keep detailed records of all wage advances and loans.
State employers may deduct a loan amount from an employee's wages only if specifically and voluntarily authorized by the employee in writing (LA Rev. Stat. Sec. 23:635).
Last updated on March 10, 2016.