Amendment to New York Labor Law allows previously prohibited deductions, including those for overpayment and advances on salary and vacation.

On September 7, Governor Andrew Cuomo signed into law New York Senate Bill S5786A-2011, which amends Section 193 of the New York Labor Law. Section 193 previously placed significant limits on the deductions employers could take from employees' wages. This amendment broadens the types of permissible deductions to include deductions for overpayments and advances. The amendment will take effect on November 6, 2012, and expire three years later, unless the legislature takes action otherwise.

Section 193

Section 193 of the New York Labor Law prohibits employers from making "any deduction from the wages of an employee," with two exceptions: (1) deductions required by law or (2) deductions that are expressly authorized by the employee in writing and that "are for the benefit of the employee." According to the New York State Department of Labor (NY DOL), this second exception permits deductions for insurance premiums, pension or health benefits, charitable contributions, and dues for labor organizations, as well as other limited deductions.

Amendment to Section 193

The amendment serves two primary purposes: (1) it establishes additional categories of permissible wage deductions that may be taken by employers (with the written consent of employees), and (2) it provides for the use of wage deductions to recapture overpayments of wages due to clerical or mathematical errors or for repayment of advances on wages or vacations paid to employees.

Under the amendment, employers are permitted to make deductions for numerous reasons that were previously prohibited, including the following:

• Discounted mass transit tickets, passes, or cards
• Fitness, health club, and/or gym membership dues
• Cafeteria, vending machine, and pharmacy purchases made at the employer's place of business
• Tuition, room, board, and fees for nursery, primary, secondary, and post-secondary education costs
• Day care and before- and after-school care expenses

However, just as it was prior to the amendment, deductions are only permitted if expressly authorized in writing by the employee and if the deductions are, generally, for the benefit of the employee.

The amendment also allows employers to deduct from employees' wages to recover advances in pay, unintentional overpayment of wages, or advances on vacation. Prior to this amendment, the NY DOL held the view that employers were prohibited from taking any of these deductions, even with employee consent. This led many employers to stop providing advances on vacation or salary to employees because they would be unable to recover those advances.

The amendment requires that, before any deduction is made, the employee must receive "written notice of all terms and conditions of the payment and/or its benefits and the details of the manner in which deductions will be made." Further, the employer must provide the employee with information regarding deductions and an updated total of all deductions from the employee's wages. Employees have the right to revoke authorization for any or all wage deductions at any time, and employers are required to cease those deductions as soon as possible. The NY DOL is expected to issue regulations on the timing, frequency, and notice requirements of these deductions.

Implications

This change is welcome news for both employers and employees because it offers significantly greater flexibility for employers to offer employees benefits, such as advances on salary and vacation, direct payment of discounted parking or transportation passes, fitness club memberships, and many others, without violating NY DOL regulations. Prior to the amendment, these payroll deductions were not permitted, even if both employer and employee agreed to them. It is important, however, that employers review their wage deduction policies and keep abreast of NY DOL regulations that may significantly affect the procedures that must be followed before making these deductions. Further, employers should ensure that their procedures for informing employees of these deductions and their methods and recordkeeping for documenting these deductions are in accordance with the amendment and the forthcoming NY DOL regulations. Employers must also be sure to maintain authorizations in case there is a later challenge to the deduction.