Beginning 6 November 2012, the same day Americans head to the polls, employers in New York will be able to make deductions from employees’ wages, with employee consent, for a wider array of reasons than the law previously allowed.

Under New York Labor Law Section 193, employers have been prohibited from making deductions from employees’ wages except in very limited and narrowly interpreted circumstances, even when employees desired it. Authorized exceptions included only “payments for insurance premiums, pension or health and welfare benefits, contributions to charitable organizations, payments for a United States’ bond, payments for dues or assessments to a labor organization, and similar payments for the benefit of the employee.” This provision has been narrowly interpreted by the New York State Department of Labor to require that the desired deduction be very similar to the deductions expressly identified in the statute.

The amended statute, signed into law by Governor Andrew Cuomo, will significantly expand the types of authorized deductions, provided that the employee consents in writing. Notably, employers will now be permitted to deduct wages to recoup inadvertent overpayment of wages or repayment of salary or wage advancements, a previously-prohibited deduction that caused much consternation. Deductions now will be permitted for:

  • discounted parking or items that entitle the employee to use mass transit;
  • fitness center, health club, and/or gym membership dues;
  • purchases made in the employer’s cafeteria, vending machines, or pharmacy;
  • day care, before-school and after-school care expenses; and
  • deductions made in conjunction with an employer-sponsored pre-tax contribution plan approved by the IRS or other local taxing authority. 

Moreover, non-profit hospitals or affiliates may deduct payments for market-rate housing; hospitals, colleges, and universities may deduct payments for purchases made in employer-operated gift shops; and most educational institutions may deduct tuition, room, board, and fees.

New York employers should update their policies to reflect the new permitted wage deductions and draft authorization forms. These forms, which must be provided to employees in advance, should contain “all terms and conditions of the payment and/or its benefits and the details of the manner in which the deductions will be made” and must be maintained throughout the employee’s employment and for six years thereafter.

With respect to deductions for overpayments or advances, employers must also comply with regulations to be issued by the Commissioner of Labor regarding the size of overpayments that may be deducted; the timing, frequency, duration, and method of recovery or repayment; limitations on the periodic amount of such recovery or repayment; the notice required to be given to employees before commencing the recovery or repayment; and a procedure that must be implemented to enable employees to dispute the overpayment or repayment or seek a delay of the recovery or repayment.

Finally, New York employers should take note that the amendment expires on 6 November 2015, unless additional legislation is passed that makes the changes permanent.

The full text of the new law may be found here.