On June 21, 2012, the New York State Senate and Assembly passed Bill No. A10785-2011 loosening the restrictions previously imposed on employers by New York's wage deduction statute (New York Labor Law § 193). The legislation, signed by Governor Cuomo on September 7, 2012, becomes effective November 7, 2012. The new legislation will allow New York employers to make a larger range of payroll deductions than those currently outlined in § 193. The amendments also impose several new deduction-related requirements on employers.

Prior Interpretation of § 193

Currently, the New York Department of Labor ("NYDOL") prohibits employers from making a wage deduction from an employee's pay, if that deduction is not significantly "similar" to those that are already recognized in the statute as lawful (e.g., deductions for insurance premiums, pension or health and welfare benefits, contributions to charitable organizations, payments for U.S. savings bonds and union dues payments). Even in these circumstances, the employer can still only make deductions from an employee's wages so long as the deduction has been previously authorized by the employee in writing.

Recently, the NYDOL has further opined that the following types of employee wage deductions, among others, are unlawful:

1. Deductions for loans, wage payments or wage advances owed to an employer;
2. Deductions for the recoupment of tuition assistance monies owed to an employer; and
3. Deductions for purchases from employer or employee-sponsored stores, cafeterias or establishments.

The NYDOL in its earlier opinions specifically determined that these types of deductions were unlawful (even with an employee's voluntary agreement and written authorization) because they were not sufficiently "similar" to § 193's previously enumerated list of permissible payments.

The Current § 193 As Amended

The amended § 193 will expand the enumerated list of permissible wage deductions to include:

• Prepaid legal plans;
• Purchases made at events sponsored by a bona fide charitable organization affiliated with the employer, where at least 20% of the profits from the event are contributed to a bona fide charitable organization;
• Discounted parking or discounted passes, tokens, fare cards, vouchers, or other items that entitle an employee to use mass transit;
• Fitness center, health club, and/or gym membership dues;
• Cafeteria and vending machine purchases made at the employer's place of business and purchases made at gift shops operated by the employer, where the employer is a hospital, college or university;
• Pharmacy purchases made at the employer's place of business;
• Tuition, room, board and fees for pre-school, nursery, primary, secondary, and/or post-secondary educational institutions;
• Day care, before-school and after-school expenses; and
• Payments for housing provided at no more than market rates by non-profit hospitals or affiliates.

The amendment will additionally allow employers to recover inadvertent wage overpayments and wage advances by payroll deductions under certain limited circumstances, which circumstances must include provisions relating to employee notice and dispute resolutions procedures.

The amendment will also require new deduction-related requirements that New York employers must follow. Specifically, "all terms and conditions of the payment and/or its benefits and the details of the manner in which deductions will be made" must be provided to employees in advance. Additionally, employers must now give advance notice to employees if there is a "substantial change" in the terms or conditions of payment (e.g., a change in the amount of the deduction, etc.). The amendment also establishes limitations on the total amount of deductions that may be made for certain purposes each pay period. Moreover, employers under the amendment must now keep any "written authorization" required under § 193 for the respective employee's entire period of employment and, then, for an additional six (6) years after the end of that employment.

New York employers have long struggled with the NYDOL's and court's strict adherence to the limited types of deductions permitted under §193. The § 193 amendments give employers some relief from earlier interpretations of the statute, and reflect the kinds of deductions employees are routinely allowed to authorize in other states. Unless renewed or extended by future legislation, these amendments have a three year "sunset" provision, which means that they will automatically expire at the end of that period. As with any new legislation, employers should carefully review the amendments to § 193 and prepare accordingly in advance of its implementation.