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North Carolina Loans: What you need to know

The principal portion of a loan from an employer to an employee is considered to be a prepayment of wages and may be deducted from an employee's wages. When the amount or rate of the proposed deduction is known and agreed upon in advance, the employer must have written authorization from the employee, which:
• Is signed on or before the payday(s) for the pay period(s) from which the deduction is to be made;
• Indicates the reason for the deduction; and
• States the actual dollar amount or percentage of wages that will be deducted from one or more paychecks.
If the deduction is for the convenience of the employee, the employee must be given a reasonable opportunity to withdraw the authorization (NC Gen. Stat. Sec. 95-25.8).
When the amount of the proposed deduction is not known and agreed upon in advance, the employer must have written authorization from the employee, which:
• Is signed on or before the payday(s) for the pay period(s) from which the deduction is to be made; and
• Indicates the reason for the deduction.
Before any deductions are made under this provision, the employee must receive advance written notice of the actual amount to be deducted, must receive written notice of his or her right to withdraw the authorization, and must be given a reasonable opportunity to withdraw the authorization in writing (NC Gen. Stat. Sec. 95-25.8).
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The employer should maintain detailed records of all wage advances and loans.
Last reviewed on March 17, 2016.

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