Quick Hits
- On October 21, 2026, the Court of Appeals of Oregon held in Ayala v. Culbertsons LLC, held that the state’s wage law permits payroll deductions to repay employee-requested wage advances when the arrangement benefits both the employee and employer.
- The court upheld deductions totaling $1,000 because the employee received requested, interest-free advances before earning the wages and agreed in writing to specific repayment deductions.
- Oregon employers may want to document requested advances and repayment authorizations, accurately report deductions, avoid fees, and refrain from deducting repayment amounts from final wages.
The court reached this result even though the deductions ultimately paid the employer back. The decision answers a question Oregon’s appellate courts had not directly addressed: under the state’s wage statute at ORS 652.610(3)(b), a deduction made “for the employee’s benefit” does not have to be solely for the employee’s benefit.
Background
During Anthony Ayala’s employment, his employer, Culbertsons LLC, advanced him money several times before the pay periods to which the advances were related. Each advance was documented in an “Official Employee Loan Agreement,” which acknowledged Ayala’s debt and authorized specific future payroll deductions to repay it. Culbertsons deducted the agreed amounts from later paychecks, recorded the deductions in its books and on Ayala’s paystubs, and charged no interest or fees.
The eleven deductions totaled $1,000. None came from Ayala’s final paycheck or were taken when his employment ended.
Ayala sued, arguing that the deductions violated ORS 652.610(3) because they were not made for his benefit, or at least not for his sole benefit. The trial court denied his motion for summary judgment and granted Culbertsons’s cross-motion. The employee appealed.
The Court’s Decision
The Court of Appeals affirmed, with Judge James C. Egan writing the opinion. The court found that Ayala received a direct benefit from the overall arrangement. It pointed to these facts:
- Ayala requested the advances.
- Culbertsons had no contractual obligation to provide them.
- Ayala was not otherwise entitled to the funds under his employment agreement.
- The advances gave him immediate access to money he had not yet earned.
- He would not have received the advances without agreeing to repay them through payroll deductions.
- No deductions were taken from wages due when his employment ended.
- Culbertsons charged no interest or fees.
The court stated that its decision was consistent with nonbinding federal case law that read ORS 652.610(3)(b) to allow arrangements benefitting both employers and employees, and that distinguished statutory “for the employee’s benefit” language from statutes that expressly required a deduction to be solely for the employee’s benefit.
The court also rejected the idea that the deductions failed the test because they returned money to the employer. The court explained, “The question under subsection (3)(b) is whether the deduction was for the employee’s benefit.” The undisputed facts showed that the employee got the money before any deduction was made. They also showed he would not have received it without agreeing to the repayment arrangement.
Key Takeaways
Ayala gives Oregon employers appellate authority for a point that had been murky. A deduction can satisfy ORS 652.610(3)(b) even when it also benefits the employer. The decision also confirms that payroll advances can be repaid through paycheck deductions if they are carefully documented.
The court’s reasoning relied heavily on specific facts, so employers may want to consider the following:
- documenting each advance in a written agreement that acknowledges the debt and authorizes specific repayment deductions,
- making sure the employee requests the advance,
- avoiding charging interest or fees,
- recording deductions accurately in payroll records and on paystubs, and
- avoiding taking repayment from final wages owed at termination.
Ogletree Deakins’ Portland (OR) office and Wage and Hour Practice Group will continue to monitor developments and will provide updates on the Oregon and Wage and Hour blogs.
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