On May 22, 2013, the New York State Department of Labor published its long overdue proposed regulations interpreting New York’s permissible deductions from employee wages. As we covered previously in the September 2012 issue of the New York eAuthority, amendments to N.Y. Labor Law §193, which became effective on November 7, 2012, expanded New York’s permissible deductions to include categories such as an employee’s pre-authorized personal activities, inadvertent overpayments, and loans or pay advancements.

The proposed regulations, which are not yet effective and remain open to public comment until July 6, 2013, provide further guidance regarding the permissible scope of wage deductions under New York law. Of particular interest to employers are the following proposed interpretations:

  • Authorizations must be executed prior to the deduction being made. An employee will be deemed to have authorized a deduction if it is subject to a collective bargaining agreement. For all other employees, authorizations require a written agreement between the employer and the employee that is “express, written, voluntary, and informed.” The authorization must include “all terms and conditions of the deduction, its benefit and the details of the manner in which deductions shall be made.” Any “substantial change” to the deduction (e.g., a reduction in the benefit received) requires a separately executed authorization.
  • Under a catch-all provision, deductions are permitted if they are “similar payments for the benefit of the employee.” N.Y. Labor Law § 193(1)(b). However, the proposed regulations exclude from this provision mere convenience to the employee (e.g., check cashing) or deductions that provide a financial gain to the employer at the expense of employees. The following deductions are expressly excluded from Section 193(1)(b): employee purchases of tools, equipment, and attire required for work; recoupment of unauthorized expenses; repayment of employer losses, including for spoilage and breakage, cash shortages, and fines or penalties incurred by the employer through the conduct of the employee; fines or penalties for tardiness, excessive leave, misconduct, or quitting without notice; and contributions to political action committees and campaigns. However, deductions for the sale to the employee of the employer’s own goods or services is permissible.
  • The proposed regulations contain detailed requirements regarding the recovery of inadvertent overpayments under N.Y. Labor Law § 193(1)(c), which require that: (1) the employer may only recover overpayments made in the eight weeks prior to the issuance of notice; (2) the employer may recover overpayments no more than once per wage payment; (3) where the recovery of an overpayment exceeds net wages: (a) the recovery may not exceed 12.5 percent of the gross wages earned in that wage payment, (b) the deduction shall not reduce the effective hourly wage below minimum wage, (c) notice must be given at least three weeks before the deduction can be made, and (d) an expedited response must be given if the employee disputes the deduction; (4) in most situations, notice must be given at least three days prior to the deduction; (5) the notice must contain the amount overpaid in total and per pay period, the total amount to be deducted, the date each deduction shall occur, and the amount of each deduction; (6) the notice must advise the employee that he or she may contest the overpayment, the date by which the employee shall contest, and include a dispute resolution procedure; (7) as part of the dispute resolution procedure: (a) the employee must respond within one week from the receipt of notice, (b) the employer must within one week provide a clear statement regarding the company’s position with regard to the overpayment, (c) the employer must provide written notice to the employee stating that he or she has one week from receiving the employer’s response to meet with the employer to discuss any disagreements, and (d) the employer must provide a written final determination within one week of the meeting; (8) if an employee avails him or herself of the dispute resolution procedure, the employer may not take the deduction until at least three weeks after issuing a final determination; and (9) where a deduction was deemed to be improper, it must be repaid within the current pay period.

The proposed regulations are available here.