SUMMARY

The New York State Legislature has passed amendments to the Labor Law that provide greater certainty for employers as to the types of deductions that they may make from employees’ wages. The new law makes clear that it is permissible, with the employee’s prior consent, to make deductions for such items as repayment of salary advances, mistaken overpayment of wages, mass transit or parking passes, and gym membership dues. The amendments will go into effect 60 days after Governor Cuomo signs the bill, which he is expected to do very soon. This memorandum describes the wage deductions enumerated in the amendments and the new notice provisions required of employers to effect deductions.

BACKGROUND

Bill No. 10785, passed by the New York State Senate and Assembly on June 21, 2012, amends Section 193 of the Labor Law to expand the list of allowed wage deductions. The amendments require employers to provide written notice to employees detailing the deductions. The legislation was intended to respond to concerns that the Department of Labor’s interpretations of permissible deductions under Section 193 (as set forth in a number of Opinion Letters) were too restrictive.

NEW DESCRIPTION OF PERMISSIBLE DEDUCTIONS

Section 193 currently describes permitted wage deductions beyond those authorized by other provisions of law as limited to payments for insurance premiums, pension or health and welfare benefits, contributions to charitable organizations, U.S. bonds, and union dues, as well as “similar payments for the benefit of the employee,” provided the employee has agreed in writing to the deduction. Although employers and courts over the years interpreted the statute’s language allowing recovery of “payments for the benefit of the employee” as authorizing employers to make agreements with employees to recover salary advances and other beneficial payments, the New York Department of Labor in 2009 and 2010 issued a series of opinion letters taking the position that the term “payments for the benefit of the employee” should be construed as limited only to the types of payments enumerated in the statute, i.e., for welfare benefits, and pension payments. This interpretation was considered by many to be overly restrictive and wrong.

The amendments now explicitly confirm that the scope of permissible deductions is broader than the Department of Labor considered, and includes: (i) repayment of an employer’s advances of salary or wages; (ii) recovery of overpayment of wages due to mathematical or clerical error; (iii) discounted parking or mass transit passes; (iv) fitness center, health club, and gym membership dues; (v) cafeteria, vending machine, and pharmacy purchases made at the employer’s place of business; (vi) tuition, room, board, and fees for educational institutions; (vii) day care expenses; and (viii) payments for housing provided at no more than market rates by non-profit hospitals. The amendments also retain the statute’s original language that allows additional deductions to recover “similar payments for the benefit of the employee.”

The amendments provide that any deductions must be authorized in writing by the employee after he or she has received written notice from the employer regarding the terms and conditions of the deduction. An employer must notify employees in advance of any changes to those terms or conditions.

Employers must retain records of wage deduction authorizations for the duration of the employee’s employment, and for a period of six years after the employment ends. An employee may revoke in writing his or her authorization for any wage deduction at any time.  

Finally, the amendments will expire three years following the date of enactment without further legislative action. It may be that this provision was included to obtain the support of some legislators who might otherwise have opposed the bill.

FORTHCOMING REGULATIONS

The amendments instruct the Commissioner of Labor to promulgate regulations governing two types of newly specified deductions: those made to recover overpayment of wages due to mathematical or clerical errors and those made to repay advances of salary or wages. The amendments direct that the regulations must address the timing and frequency of deductions and must require the employer to implement a procedure for employees to dispute the amount of overpayment or to seek delay of any recovery.