Several recent New York State Department of Labor (DOL) opinion letters have taken the position that New York's Wage Payment Law prohibits employers from making deductions from their employees' wages in the event of an overpayment, even when the employee has authorized the deduction.
In addition, recent opinion letters have addressed, and rejected, deductions from wages for advances and loans, use of unaccrued PTO, rent charges for employer-provided housing, charges made at an employer-sponsored cafeteria, and parking garage fees.
Section 193(1) of the New York Labor Law provides that deductions may only be made from wages that:
are expressly authorized in writing by the employee and are for the benefit of the employee; provided that such authorization is kept on file on the employer's premises. Such authorized deductions shall be limited to payments for insurance premiums, pension or health and welfare benefits, contributions to charitable organizations, payments for United States bonds, payments for dues or assessments to a labor organization, and similar payments for the benefit of the employee.
Previously, the DOL had taken the position that "similar payments for the benefit of the employee" included deductions for overpayments and advances, when approved in writing by the employee. Therefore, this practice fell into the Section 193(1) exception (so long as an employer did not deduct more that 10% of an employee's wages in any one paycheck). However, the DOL's recent opinion letters, based on a reading of a New York Court of Appeals decision, take the position that these deductions violate Section 193. "Similar payments for the benefit of the employee," according to the DOL, is defined as investments of money for the later benefit of the employee, such as deductions for insurance premiums and payments for bonds, or payments for the benefit of others, such as charitable contributions or union dues. Money that goes to the employer does not fit the definition.
The DOL added, with respect to advances and overpayments, that because Section 193(2) states, "No employer shall make any charge against wages, or require an employee to make any payment by separate transaction unless such charge or payment is permitted as a deduction from wages under the provisions of subdivision one of this section," an employer may ask an employee to repay an advance or an overpayment voluntarily. However, the employer must clearly communicate to the employee that the employee's refusal to write a check will not, in any way, result in any form of disciplinary or retaliatory action. The DOL further stated that when an employee receives an overpayment and chooses not to voluntarily repay the amount, the employer's only remedy is to file a lawsuit.
Although not addressed specifically in the opinion letter, if an employer makes an unlawful deduction from an employee's wages, the employee would be entitled to repayment of the deduction, as well as 100% liquidated damages plus attorneys' fees.
The Bottom Line
In light of new opinion letters released by the New York State Department of Labor, the safest way to comply with the New York Wage Payment Law regarding deductions is to avoid making deductions from employees' pay for overpayments, advances, unaccrued PTO, or any other charges for which the employee is essentially reimbursing the company for advancing a payment. As a result, employers may want to re-examine their policies and practices with respect to advances of any kind and allowing employees to use PTO before it is accrued.
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