New York Expands Permissible Wage Deductions! Good News For Employers and Employees!

Effective November 6, 2012, employers in New York will have greater flexibility when it comes to deductions from employee wages. The new amendment to New York Labor Law Section 193 expands the list of permissible employer deductions from wages (other than withholding taxes and insurance premiums, etc.) with an employee’s written consent and allows deductions for overpayments due to clerical or mathematical errors or for repayment of advances on wages or vacations paid to employees.

Bottom Line

This is good news for employers and employees! Effective November 6^th, employers will be able to offer employees benefits, such as advances on salary and vacation, direct payment of transportation passes, child care, etc., without violating New York  Department of Labor (NY DOL) regulations.  Before this amendment, these payroll deductions were not permitted, even if both employer and employee agreed to them.  

 

Employers should review and update their wage deduction policies before making any deductions and ensure that methods of deduction and recordkeeping for documenting these deductions are in accordance with this amendment and NY DOL regulations.

If you have any questions, or would like to discuss this topic in further detail, please contact me or visit my website. 

A Little History

Prior to this amendment, Section 193 provided that no wage deductions could be made unless they were either provided for by law or by government agency rule, or they were (i) expressly authorized in writing by the employee and (ii) for the benefit of the employee, (i.e., “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.”).  

A Lot of Progress

Beginning on November 6, 2012, employers will have greater rights to take deductions from employee wages.  This will allow employees to use payroll deductions to obtain certain privileges that are “for the benefit of the employee.”

The following new deductions can be authorized in writing by an employee:

• Prepaid legal plans;

• Purchases made at events sponsored by a bona fide charity that is affiliated with the employer, provided that at least 20 percent of the event’s profits are contributed to such charity;

• Discounted parking or discounted passes, tokens, fare cards, vouchers, or other items that enables an employee to use mass transit;

• Dues for a fitness center, health club, or gym membership;

• For hospital, college and university employers, employee purchases at a cafeteria, gift shop and vending machine at the employer’s place of business;

• Pharmacy purchases at the employer’s place of business;

• Tuition, room and board, and fees for pre-school, nursery, primary, secondary, and post-secondary educational institutions;

• Day care and other before-school and after-school expenses;

• Payments for housing provided at no more than market rates by nonprofit hospitals or their affiliates.

Other Permissible Deductions

Effective November 6^th, employers will be able to make deductions from wages for these previously prohibited reasons:

• An employer may deduct from wages to recover an overpayment of wages, where the overpayment is due to a mathematical or clerical error by the employer. In doing so, the employer must comply with regulations that will be promulgated by the DOL for this type of deduction, and which will provide for, among other things, the size of overpayment subject to this permissible deduction; the timing, frequency, duration and method of the employer’s recovery; the notice required to be given to the subject employee; and a mechanism for the subject employee to dispute the attempted recovery.

• An employer may deduct from wages in order to obtain repayment of advances of salary or wages. The employer must comply with DOL regulations for this type of deduction.

NB: These amendments will expire and automatically be deemed to be repealed in three years – i.e., on November 6, 2015.  New York legislature will have to renew these amendments before on or by this date.

The Proper Way to Deduct from Wages

•         Any wage deduction must still be voluntary, and made only after the employer gives written notice to the employee of the terms and conditions of the deduction and the details of how the deduction will be made.

•         The employer must notify the employee of any substantial change in the terms or conditions of the deduction (including the amount of the deduction), before implementing the change.

•         The employer must maintain the employee’s written authorization for the deduction for the entire period of that employee’s employment, and for six years after such employment ends.

If you have any questions, or would like to discuss this topic in further detail, please contact me or visit my website.