Is there any law that states an employee's account at the bank cannot be overdrawn? We have it in our employee handbook but didn't know if that could be flexible or not.

Besides the requirement that insiders under Reg O not have overdrafts unless they are inadvertent and less than $1000 and that they are charged, obviously if they have an overdraft line to prevent this type of occurrence, that is alright, but I know of no law that prohibits employee overdrafts in general, although every bank I have worked for in the last 25 years has had a policy in their handbook with the prohibition and/or the thresholds for closing an employee's account or termination. This addresses financial responsibility on the employee's part..