Casinos clash with state on cash-shortage rule

David Strow

Thursday, May 27, 1999 | 11:13 a.m.

Do Nevada employers have the right to deduct shortages or damages from an employee's paycheck?

That's the question MGM Grand Inc and Coast Resorts want a district court judge to answer.

After losing a wage dispute case with a slot carousel worker -- and being forced to cough up $2,839 in back wages and damages -- MGM has requested judicial review of the case.

The request came two months after the Orleans, a Coast property, was ordered to pay $520 in back pay -- and $2,548 in penalties -- to a former cage cashier after similar deductions.

Coast also owns the Barbary Coast and Gold Coast hotel-casinos.

Though it's unclear how widespread the practice is in the Las Vegas area, the state Labor Commission and labor attorneys say withholding is a fairly common practice, especially among casino employees, construction workers and taxicab drivers, and has been going on for at least a decade. A review by a judge could have a big impact on Clark County's casino workers and their employers.

"By itself, it would not be binding on any other court," said Keith Kizer, a deputy attorney general. "But it would give some sort of guidance, pretty strong guidance. Either way, there will be certainty added to this law."

Gary Moss, the attorney representing MGM in its legal action against the commission, said he believed it was the first time employers had asked for judicial review of the law and its interpretation.

At dispute is the interpretation of Nevada Revised Statutes 608.100 and 608.110. The law prohibits an employer from paying an employee less than an agreed upon wage, unless the deduction "is for the benefit of the employees, or other deductions authorized by written order of the employee."

The Labor Commission ruled that blanket deduction authorizations were little more than an attempt to use the employee as an insurer against losses. The casinos countered that the policy was to the benefit of the employee, since the alternative was discharge.

Robert Mitchell, a carousel attendant, joined MGM in 1993. One year later, he claimed, MGM established a shortage policy allowing the company to deduct any shift shortages from the attending employee's paycheck. The policy was exclusive to MGM slot workers, he said.

Mitchell signed the first form authorizing deductions in 1995. But Mitchell claimed that he "feared termination if he did not sign the forms," according to his complaint with the Labor Commission.

On 24 separate occasions from 1995 to 1998, Mitchell had pay deducted for shortages, he alleged, although MGM simply pocketed any overages. MGM never proved that any of the shortages were the result of "dishonest, willful or negligent act(s)," Mitchell said.

The Labor Commission took issue with MGM on that fact, since it means an employee has to prove innocence, rather than the employer proving guilt.

MGM countered that by deducting from Mitchell's pay, he was benefitting, because the alternative would have been his discharge. And it noted that Mitchell had voluntarily signed the forms authorizing the deductions.

An MGM spokeswoman downplayed the significance of the company's suit.

"This suit is nothing more than a disagreement between the Nevada State Labor Commission and an employer regarding the interpretation of the applicability of a statute," said MGM spokeswoman Shelley Mansholt. She declined to comment further.

A similar case involving former Orleans cage cashier Sandra Meranian was filed in March.

When hired in November 1996, Meranian signed a blanket form stating that all shortages on her shift would be deducted from her paycheck. On two occasions, in February and March of 1998, a total of $520 was deducted because of shortages. Louise Johnson, human resources director at the Orleans, testified before the commission that an employee would be immediately terminated if he or she failed to sign the blanket form and a shortage occurred later on the employee's shift.

"A pre-loss blanket authorization is a prospective waiver of an employee's rights and is not a knowing or intelligent waiver of her right to receive full pay," the Commission wrote in its decision.

In its March decision, the Commission further stated that an employer was in a "superior bargaining position," and couldn't use the actual or implied threat of discharge to force an employee to sign such a form.

In its request for judicial review, Coast Resorts blasted the heavy penalty levied against it.

"The employer must risk having to pay five times the amount of the wages if it dares to challenge the Nevada State Labor Commission on the interpretation of this statute," wrote attorney Barry Lieberman.

Coast Resorts also said Meranian filed the complaint in June 1998, one month after it said she was discharged by the Orleans for an unrelated matter.

Statewide, about 10 to 15 cases a month alleging unauthorized deductions come before the state's Labor Commission.

"There have been complaints from dealers in casinos on similar matters in the past," Las Vegas labor attorney Victor Perri said. "I've received information that in the construction industry, and taxi industry, employers are taking directly out of paycheck monies to compensate the employer for damage to vehicles. Some employers feel like they should be able to offset damages (with deductions). But it's quite clear they cannot do that.

"They may have a claim for recklessness, but that doesn't give them the right to automatically offset wages. My suspicions are this is fairly common."

Patrick Christoff, an attorney with Ken Ashworth & Associates and former deputy attorney general with the Labor Commission, said the practice is usually reserved for large shortages, such as $300 or more. But Mitchell was awarded a total of $1,674 for 24 incidents, suggesting the shortages were far below that $300 threshold. And in one instance at the Orleans, Meranian had pay deducted for a $20 shortage.

"These people come up short every day," Christoff said. "If they start taking that out of people's wages, that could be big."

Culinary Union Local 226 concedes the right of deduction to employers in most of its contracts with Strip casinos, said Jim Bonaventure, administrative director for legal affairs at the union. The union represents more than 40,000 workers.

But the language of the union contracts also makes it clear a single employee must be identified as the source of the shortage. The employee then has a right to consultation with a supervisor before the deduction occurs. That language is included in MGM's 1997 contract with the union, Bonaventure said.

In his complaint, Mitchell alleged that more than one attendant worked on his carousel during the shift where shortages were found.

"Our language says no automatic cash deductions until after consultation and proof," Bonaventure said. "That used to happen a lot more frequently than it does now, but it still goes on.

"Any time someone is dealing with cash, making change, there's got to be some rules there concerning if you're short, whether it's fast food, a bank or a casino. (The employer) is looking to protect themselves."

"The employer must risk having to pay five times the amount of the wages if it dares to challenge the Nevada State Labor Commission on the interpretation of this statute."Barry LiebermanATTORNEY