Last week, the New York Department of Labor ("DOL")
published proposed regulations governing the new categories of
permissible wage deductions in Section 193 of the New York Labor
Law that took effect in November 2012. The law was amended to
allow: (1) new types of deductions made for the benefit of the
employee, (2) deductions made to recapture overpayments of wages
due to employer error, and (3) deductions made to repay wage
advances given to employees. We detailed the revisions to the law
in a September 2012 Alert available here. When
finalized, the regulations governing these deductions will be
codified at 12 N.Y.C.R.R. 195.
Deductions for the Benefit of the
Employee
The amended Section 193 created a number of new permissible wage
deductions for the benefit of employees, including those made for
discounted parking passes or fare cards, gym membership dues,
cafeteria purchases, and day care expenses, among others. It also
permitted "similar payments for the benefit of the
employee," but did not describe those payments.
The proposed regulations make clear that deductions for the
benefit of the employee include only (1) items explicitly listed in
Section 193 or (2) items in one of six categories that correspond
to those listed deductions:
- Health and Welfare Benefits (e.g., insurance premiums, gym memberships, and day care)
- Pension and Savings Benefits (e.g., pension benefits and U.S. bonds)
- Charitable Benefits (e.g., charitable contributions)
- Representational Benefits (e.g., labor dues)
- Transportation Benefits (e.g., parking passes and fare cards)
- Food and Lodging Benefits (e.g., cafeteria and vending machine purchases)
Deductions made for fines for misconduct or tardiness, political
contributions, or for recoupment of unauthorized employee expenses,
among other things, remain impermissible.
All deductions made for the benefit of the employee must be
authorized in advance by the employee in a written agreement
(electronic or hard copy) that is express, voluntary, and informed.
Oral notice or authorization is insufficient for all deductions
permitted by Section 193. For an authorization to be informed,
before it is executed, the employee must be provided with
written notice of the deduction's terms and conditions, the
benefit to which it is related, and the manner in which deductions
will be made. That written notice must be provided any time the
amount of the deduction changes or there is a "substantial
change" in the benefits provided (including any reduction
of benefits). For deductions made for cafeteria or similar
purchases that may fluctuate from one pay period to the next, the
notice should list a deduction range that includes a ceiling for a
single pay period.
Deductions for Overpayments
Employers will also be able to make deductions to recover
overpayments made due to the employer's mathematical or
clerical error. The proposed regulations require the employer to
first provide notice to the employee of its intent to make the
deduction(s). This notice must be given within eight weeks of the
employer's overpayment. Deductions can be made no more
frequently than once per wage payment, and recovery can come in the
form of a wage deduction or a separate transaction.
For overpayments that are equal to or less than "the net
wages earned after other permissible deductions in the next wage
period," the employer may recover the entire overpayment
amount in the next wage payment. Before doing so, it must give at
least three days' notice to the employee.
For overpayments that exceed a single payment of net wages,
deductions (1) may not exceed 12.5% of the gross wages earned in
that pay period, and (2) may not reduce the effective hourly wage
below the minimum wage (which will increase from $7.25 to $8.00 on
December 31, 2013). Before beginning these deductions, the employer
must provide at least three weeks' notice to the
employee.
Employers must also implement a procedure under which the employee
may dispute the overpayment and terms of recovery (the proposed
regulations include a number of specific process requirements). An
employee has two days to respond to the employer's notice in
the case of overpayments equal to or less than a single payment of
net wages; he or she has one week to respond to a notice of an
overpayment exceeding this amount. If the employee does protest,
the employer must not make the deduction until at least three weeks
after the process concludes. The failure to afford this process to
the employee creates the presumption that the contested deduction
was impermissible.
Deductions for Wage Advances
Finally, the draft regulations allow employers to make
deductions for wage advances given to employees. The employer and
employee must agree in writing to the amount to be advanced, the
deduction amount (in total and per wage payment), and the date(s)
on which each deduction will be made. The authorization must also
include notice to the employee that he or she may contest
deductions that are not taken in accordance with the
authorization's terms. If the wage advance is accompanied by
interest or a fee or fees, it is not an advance under the Labor Law
and cannot be recovered via wage deductions.
Employers may recover advances by making deductions no less
frequently than each wage payment. Advances may be recovered
through wage deductions or a separate transaction. If an employee
is terminated or leaves the organization prior to the advance being
repaid, and the written authorization allows for it, the remaining
advance can be recovered through a larger deduction from the last
wage payment.
Once the employee has taken the advance, he or she may not revoke
his or her deduction authorization. And an employee cannot be given
a second wage advance until the first has been repaid in
full.
As with deductions for overpayments, employers must implement a
dispute procedure that allows the employee to dispute the amount
and frequency of deductions that are not permitted by the
authorization. The employee must be able to provide written notice
of his or her objection, and the employer must reply in writing
"as soon as practical." If an employee protests the
deductions under this procedure, the employer must cease its
deductions until it has replied to the employee. The failure to
afford this process to the employee creates the presumption that
the contested deduction is impermissible.
The full text of the proposed regulations is available here. Public comments on the proposed
regulations can be sent to regulations@labor.ny.gov through July 6,
2013.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.