New York Wage Deduction Regulations Go Into Effect

Author: Rena Pirsos, XpertHR Legal Editor

Date: October 14, 2013

The New York State Department of Labor (DOL) has issued final regulations that implement and provide guidance regarding 2012 amendments to the state's permissible wage deductions law, including provisions for deductions for overpayments of wages and repayments of advances. The 2012 amendments expanded the types of deductions employers may make from employees' wages, effective from November 6, 2012 through November 6, 2015, unless the provisions are renewed before expiring. The regulations adopt, without substantive change, proposed regulations published on May 22, 2013. They are effective as of October 9, 2013.

Current law permits certain deductions from wages that are authorized by, and for the benefit of, the employee. Those deductions are limited to the ones that are specifically listed in the law and to "similar payments for the benefit of the employee."

'Authorized by the Employee'

The final regulations clarify that an employee's authorization will be assumed if the deduction is agreed to in a collective bargaining agreement or in an agreement between the employer and the employee that is:

  • Express;
  • Written;
  • Voluntary; and
  • Informed.

An employee's authorization will be considered informed if the employee has been given advance written notice of all terms and conditions of the deduction, the benefits of the deduction, and the details about how the deductions will be made. The employer also must inform the employee of any change in the amount of a deduction, or of a substantial change in the benefits of the deduction (e.g., a reduction in the benefit received for the deduction). The regulations provide additional details regarding each of these elements.

'For the Benefit of the Employee'

According to the regulations, deductions are for the benefit of the employee if they provide financial or other "support" for the employee, his or her family or a charitable organization. "Support" is limited to the following seven categories of benefits:

  • Health and welfare;
  • Pensions and retirement;
  • Child care and education;
  • Charity;
  • Dues and assessments;
  • Transportation; and
  • Food and lodging.

In addition, while each wage deduction may provide some level of convenience to employees in facilitating payments, convenience itself is not a recognized benefit for purposes of determining whether any given deduction is for an employee's benefit. On the other hand, while every deduction may provide some general indirect benefit to employers by helping to attract and maintain a stable and productive workforce, deductions that result in financial gain to the employer at the expense of the employee call into question whether the deduction provides a benefit to the employee. However, the regulations do not preclude an employer from making deductions in all cases where the employer derives a benefit.

'Listed and Similar Payments'

Payments that are for an employee's benefit and not otherwise prohibited will be considered "similar" and allowed if they fall into one of the seven benefit categories listed above. The regulations provide non-exclusive examples within each of the seven benefit categories. They also provide a non-exclusive list of deductions that are not considered "similar" to those listed in the labor law and the seven categories.

Deductions for Overpayments

The regulations permit an employer to make deductions from an employee's wages for overpayments due to a mathematical or other clerical error of the employer under the following conditions:

  • The employer must notify the employee of its intent to make deductions either three days or three weeks in advance, depending on the amount;
  • The employer must provide the notice within eight weeks after the overpayment occurs, and the wage deductions to recover the overpayment may be made over a maximum period of six years from the original overpayment;
  • Only one deduction is allowed per pay period per employee;
  • If an overpayment is less than or equal to the employee's net wages earned in the next pay period, the employer may deduct the entire amount from the next wage payment;
  • If an overpayment exceeds the employee's net wages earned in the next pay period, the employer must not deduct from that wage payment more than 12.5 percent of gross wages earned, and the deduction must not reduce the employee's effective hourly wage rate below the state minimum wage; and
  • Employers must adopt procedures for employees to dispute the overpayment and the terms and/or timing of the recovery.

Deductions for Repayments of Advances

The regulations also permit employers to make deductions for repayment of advances, salary or wages. An advance occurs when an employer provides money to an employee in anticipation of future wages. An employer that wishes to make deductions to recover an advance must adhere to the following rules:

  • Before giving the advance, the employer and employee must agree in writing to the timing and duration of the repayment deductions. Total repayment through one deduction from the employee's last wage payment upon his or her termination of employment is allowed;
  • An employer may only make one advance or deduction for an advance at a time. Prior existing advances must have been repaid in full;
  • For each employee, an employer is not permitted to make more than one deduction per pay period to recover an advance; and
  • Employers must adopt procedures for employees to dispute the amount and frequency of deductions and give prior written notice of the procedure to employees who receive an advance.