Employers who overpay their New York employees now have a limited option to recoup those overpayments from future wages – an advantage previously denied them under New York wage payment laws.

For many years, New York Labor Law Section 193 prohibited virtually all types of deductions from employee pay, even where an employee consented to the deduction, and even where the deduction was made to recoup a wage overpayment. In November 2012, Section 193 was amended to expand the circumstances under which employers can make deductions, permitting deductions in the event of wage advances or inadvertent wage overpayments due to mathematical or clerical error. Such deductions, however, are permitted only if made in compliance with regulations promulgated by the NYSDOL.

The NYSDOL’s October 2013 final regulations now provide guidance on when and how lawful deductions from employee pay may be made. The regulations set forth strict notice, timing, and procedural requirements that must be followed in order for an employer to make deductions for advancements and overpayments.

An employer that makes improper wage deductions will be liable not for only the amount of the unlawful deduction but also for liquidated damages equal to 100 percent of the deduction and attorneys’ fees.

Given the potential penalties for non-compliance, employers should audit their practices to ensure compliance with the new laws and regulations. This should include a review and revision of employee handbooks, manuals, and other policies that address wage deductions. Employers should also develop internal documents and forms to enable management and payroll staff in making lawful deductions, including required notices of intent and authorizations for deductions.