Good news for New York employers awaiting authorization to make wage deductions under the 2012 amendments to the state’s Labor Law:  the Department of Labor has posted final rules on its website.  The final rules became effective yesterday.

As we previously reported, the Department of Labor posted draft rules on its website earlier this year and made them available for public comment.  As we also previously reported, the Labor Law amendments loosened restrictions on employers’ ability to make deductions from employees’ wages.  The most significant provisions permit employers to recoup inadvertent overpayments and pay advances, provided the affected employees have authorized such deductions in writing.  But, even though Governor Cuomo signed the law on September 7, 2012, employers have been waiting for the Department of Labor to publish implementing regulations. 

Now that the final rules are effective, employers can begin putting in place programs to take advantage of the new law.    

The final rules permit employers, after first obtaining an employee’s voluntary and informed written permission, to make wage deductions for “an overpayment of wages where such overpayment is due to a mathematical or other clerical error by the employer” as follows:

  • The employer must provide notice of its intent to make deductions either three days or three weeks before the deduction, depending on the amount deducted.
  • The employer’s notice must be made within eight weeks of the overpayment, although the wage deductions to recover the overpayment may continue for up to six years from the original overpayment.
  • For each employee, only one deduction per pay period to recover for an overpayment is permitted.
  • If the overpayment is less than or equal to the net wages earned in the next pay period, the employer may recover the entire amount in that next wage payment.  On the other hand, if the overpayment exceeds the net wages, recovery is limited to 12.5% of gross wages earned in that wage payment, and the deduction may not reduce the effective hourly rate below the minimum wage (slated to increase to $8.00 on December 31).
  • Employers must adopt procedures for employees to dispute the overpayment, the terms of recovery, and/or the timing of the recovery.

The rules also permit employers to make deductions for repayment of advances of salary or wages.  An “advance” is defined as the provision of money by the employer to the employee in anticipation of future wages.  Any provision of money accompanied by interest or fees, however, is not an advance and may not be recovered through wage deductions.

Where there has been a proper advance, employers may make deductions as follows:

  • Before the advance is given, the employer and employee must agree in writing to the timing and duration of the repayment deductions. The terms of this agreement may include total reclamation through a deduction on the last wage payment upon termination of employment.
  • Only one advance is permitted at a time. No advance may be given, or subject to deductions, until an existing advance has been repaid in full.
  • For each employee, only one deduction per pay period to recover for an advance is permitted.
  • The employer must adopt procedures by which employees may dispute the amount and frequency of deductions, and any employee receiving an advance must get written notice of the dispute procedure.

Employers seeking to implement a wage deduction program to recover for overpayments or wage advances, or to make any other type of deduction permitted by the new law and rules should consult with counsel.