Significant Changes to New York’s Wage Deduction Law

September 19, 2012

On September 7, 2012, Governor Andrew Cuomo signed into law a bill passed by the New York State Senate and Assembly earlier this summer, which amends Section 193 of the New York State Labor Law governing permissible wage deductions. The amended law expands the ability of New York employers to make certain authorized deductions from an employee’s wages. The changes will go into effect on November 6, 2012, and will expire after three (3) years unless otherwise extended.

The Amended Law Allows Notable New Categories of Permissible Wage Deductions

Currently, Section 193 provides employers with a limited list of permissible wage deductions from an employee’s pay check: insurance premiums, pension, health or welfare benefits, charitable contributions, bonds, union dues, or similar payments for the benefit of the employee. The current list has been strictly construed by the New York State Department of Labor, which has opined that, inter alia, deductions for overused vacation and employee loans were impermissible.

Under the amended law, certain new categories of authorized wage deductions will immediately be permissible as of the effective date of the amendment. Subject to an employee’s written authorization, these include, among other things: deductions for prepaid legal plans; purchases at certain charity events affiliated with the employer; discounted parking or certain mass transit costs; health club memberships; purchases from a cafeteria, vending machine or pharmacy located on the employer’s premises; and certain tuition and other expenses for educational institutions and childcare.

Additionally, there are notable additional categories of authorized deductions that employers will be able to make after forthcoming regulations are issued by the New York State Department of Labor. These include wage deductions for clerical or mathematical errors resulting in overpayment of wages, as well as the repayment of certain monetary advances such as overpaid vacation or employee loans. The forthcoming regulations will address issues relating to the timing, frequency, duration, amount and method of repayment, the type of notice required to be provided to an employee before commencing repayment and a dispute resolution procedure. We will keep you apprised of these developments and any other guidance issued by the New York State Department of Labor.

The potential to recoup wages provides employers with the opportunity to deduct for employee fringe benefits such as tuition reimbursement, vacation advances or employer-sponsored loans without the necessity of litigation in the event an employee fails to fulfill repayment obligations.

How To Proceed With the New Deductions

Prior to taking a deduction from an employee’s wages, the amended law requires that an employer provide the employee with written notice setting forth the terms and conditions of the deduction along with the manner in which it will be deducted. The employer may only begin to deduct from an employee’s wages when it receives written authorization from the employee, which must be maintained by the employer for the duration of the employee’s employment and for six (6) years after employment ends. Employers are required to notify employees of any substantial changes to the terms or conditions of the deductions, including a change in the benefits or the manner in which the deductions are made.

Additionally, with respect to any wage deductions made for payments at charity events, purchases at a cafeteria, vending machine or pharmacy located at the employer’s premises, or other payments made for the benefit of an employee that the New York State Department of Labor deem are “similar” to those enumerated in the law, employers are prohibited from allowing such payments or purchases to exceed the limit established by the employee (or, in the alternative, set by the employer). For such benefits, employers must also provide the employee with free access to current account information.

If you have any questions concerning this, please contact one of the attorneys listed below.


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