Alerts and Updates

New York Legislature Expands Permissible Wage Deductions

August 28, 2012

The new bill allows an employer to make wage deductions related to the recovery of an overpayment of wages where the overpayment is due to a mathematical or other clerical error by the employer, and repayment of salary advances.

The New York Legislature recently passed legislation that amends Section 193 of the New York State Labor Law and greatly expands the number of deductions an employer may permissibly make from an employee's wages. [Update: Governor Andrew Cuomo signed the bill on September 7, 2012. The statute becomes effective on November 6, 2012, and expires in three years unless it is extended by future legislation.]

Section 193 of the Labor Law currently prohibits deductions from an employee's wages unless they are required by law or are expressly authorized in writing by the employee and are for the benefit of the employee. Such authorized deductions are statutorily limited to payments for insurance premiums, pension or health and welfare benefits, contributions to charitable organizations, payments for United States bonds, payments for dues or assessments to a labor organization and similar payments for the benefit of the employee. Section 193 has been narrowly construed by the New York State Department of Labor to prohibit many wage deductions, including deductions for repayment of employer loans, repayment of pay and vacation advances, inadvertent overpayment, tuition, employee parking passes, and employee purchases at the employer’s cafeteria.

The new bill allows an employer to make wage deductions related to the recovery of an overpayment of wages where the overpayment is due to a mathematical or other clerical error by the employer, and repayment of salary advances. These deductions shall be pursuant to regulations that will be issued by the Commissioner of the Department of Labor governing the timing, frequency, duration, and method of repayment; limitations on the periodic amount of such repayment; notice requirements; and employer requirements to implement a dispute procedure.

Additionally, the bill allows an employee to voluntarily agree in writing to new permissible wage deductions including deductions for:

  • Discounted Parking or Mass Transit Expenses
  • Health Club or Gym Membership Dues
  • Cafeteria and Vending Machine Purchases at the Employer’s Place of Business
  • Tuition and Related Expenses for Certain Educational Institutions
  • Day Care Expenses
  • Prepaid Legal Plans
  • Charitable Purchases in Certain Instances
  • Payments for Housing Provided By Non-Profit Hospitals or Affiliates

Although the bill expands the number of permissible voluntary deductions, some deductions remain prohibited under the bill including deductions for:

  • Cell Phones, Smartphones, Laptops, and Other Electronic Equipment
  • Vehicles
  • Spoilage or Breakage
  • Cash Shortages or Losses
  • Fines or Penalties for Tardiness, Excessive Leave Usage, Misconduct, or Quitting Without Notice
  • Recoupment of Unauthorized Expenses

The bill requires employers to keep an employee's deduction authorization throughout their employment and six years after their employment ends. Employers are required to give employees access to current account information, at no charge, detailing their wage deductions and a running total of the amount that will be deducted from their pay. Employees have the right to revoke voluntary wage deductions at any time, and the employer must cease the deductions no later than four pay periods or eight weeks after authorization has been revoked, whichever is sooner.

The bill becomes effective 60 days after it becomes law and expires three years after the effective date, unless it is extended by the Legislature.

What This Means for New York Employers

New York employers should consider taking steps now to ensure compliance with the new law, including reviewing their workplace policies and considering allowing additional wage deductions in accordance with the new law. Employers would be prudent to avoid wage deductions for overpayment of wages or repayment of salary advances until the Department of Labor issues regulations governing these deductions. Once the law is effective, employers should consider providing training to their human resources staff on this new law and the additional flexibility it provides to employers to recoup overpayments and salary advances.

For Further Information

If you have any questions about this Alert, please contact any of the attorneys in our Employment, Labor, Benefits and Immigration Practice Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.