The new 12 NYCRR Part 195 (here) took effect on October 9, 2013. New York employers can deduct from wages (“made in accordance with any law”) for recovery of overpayments, for repayment of salary advances, for pre-tax contribution plans approved by the IRS, and for wage garnishments and levies for child support and taxes. Deductions from wages also can be made if “authorized and for the benefit of the employee.”
A deduction can be “authorized” under a collective bargaining agreement, or by a written agreement between the employer and employee. Prior to the deduction (or certain changes to one), the employee must be provided with written notice of the deduction, the details, and the benefit to the employee. When the deduction fluctuates based on a purchase (e.g., meals), the notice may provide for a range of deductions. A deduction is for the “benefit of an employee” when it provides financial or other support limited to the following categories: health and welfare benefits, pensions and retirement benefits, child care and educational benefits, charitable benefits, dues and assessments, transportation, and food and lodging. These categories are defined in the statute.
Wage deductions may not be made for, among other things, repayments of loans or advances, employee purchases of tools or required uniforms, recoupment of unauthorized expenses, repayment of employer losses (e.g., spoilage and breakage, cash shortages), fines or penalties for tardiness (or excessive leave, misconduct, or quitting without notice), political contributions, or for certain fees.
Deductions may be made (very carefully) to recoup wage overpayments due to a mathematical or clerical error, but there are several restrictions.
- A notice of intent must be provided. If the entire overpayment can be recovered in the next pay period, notice is required least three days prior to the deduction. In all other cases, notice is required at least three weeks before the deduction. The notice must inform the employee that he/she can contest the deduction through a formal procedure.
- The employer can recover overpayments made in the eight weeks prior to the issuance of the notice, and the employer can make deductions to recover overpayments for a period of six years from the original overpayment.
- Only one overpayment deduction can be made per pay period.
- If the entire overpayment is less than or equal to the net wages earned in the next pay period, the employer can recover the entire amount. If the overpayment exceeds the net wages in the next pay period, the deduction cannot exceed 12.5% of the gross wages earned (or reduce the effective hourly wage below minimum wage).
- A procedure for disputing the overpayment and noticed deduction must be adopted. The employee must respond within one week from receiving the notice, the employer must reply within one week, the employee must be provided written notice of the opportunity to meet with the employer within one week of receiving the reply, and the final determination must be provided within one week of the meeting. When an employee utilizes this procedure, the deduction may not be made for three weeks after issuing the final determination. There are different procedures for a full deduction to be made from the next pay period.
Finally there are detailed rules for recovering a wage advance (written agreement, one advance at a time, one deduction per pay period, final pay deduction, and adoption of dispute procedures).
Because compliance requires satisfaction of several layers of technical requirements, we highly recommend working with counsel before making any deductions from wages.