In the abstract, and without any relevant facts whatsoever, the only possible answer is yes.
That may be an issue. Why don't you provide a bit of a narrative about what's happening and answer all of the questions that "adjusterjack" asked in the first response in the thread (although maybe those questions aren't really relevant)?
Since this doesn't appear to involve you, it's none of your business, but it now sounds like your concern is the employer's threat to take the money out of the employee's paycheck, rather than the legality of the "service fee."
Do you really think that interjecting yourself into a dispute between your employer and another employee is a good idea? What are you going to do: tell your boss that some anonymous strangers (none of whom are in Iowa, by the way) on thelaw.com said it's not legal?
I answered all of adjusterjack's questions, so I'm not sure what else I'm supposed to say. It is in Kansas, not Iowa. Maybe I selected Iowa by mistake...?
The employee he is doing it to is my significant other, who stepped in when I got long COVID and couldn't work. I still haven't been able to actually go back due to issues with my heart that I have had since. I now do remote stuff, making order lists, tags, etc. If he hadn't stepped up, that shop would have gone under during the pandemic. He has been doing everything that I did to keep the shop going, when no one else has ever been willing to take care of things the way they should. Even if the employee weren't my significant other, I would say something, because it isn't right and employees should be treated better than that. I wanted to keep that information private, in case he somehow saw all of this. I was being vague to protect us, but here we go.
If he is going to threaten to dock pay and treat someone badly for not doing something that is illegal in the first place, I am going to call him out.
I came here because none of my searches, no matter how I worded it, came up with any sort of answer.
He has an accountant who did try to get him to just changed the prices instead of doing the fee, but now she is encouraging his behavior. That is why I had thought it must be legal for so long, I thought that, otherwise, she would tell him that what he is doing isn't.
However, a customer there had recently asked why her business was being advertised in the shop. The shop owner had given her "shares" and advertises for her for her services. I don't know if any money changes hands at all or not. Anyway, the customer warned that we need to be careful, because she had done some shady stuff when she was his accountant and he actually paid her. He competely lost his business because of it and is still dealing with the fallout.
That and the recent events made me look elsewhere for answers. The "service fee" was something that had bothered me from the beginning, which I had voiced to him. He got the idea from noticing that there was a service fee on a recipient from a food delivery, which seemed to be more because they delivered it. I never noticed the fee when I picked up food from there.
. The fact of the matter, as you alluded to in your post, it's really a bad idea for the OP to insert herself in the middle of this. The OP could quietly point out the law that makes such things illegal, but getting in the middle of it is a bad idea.