United States: Are You Ready For The Final Wage Deduction Rules?

The New York State Department of Labor (NYSDOL) issued final Wage Deduction regulations, effective October 9, 2013. The regulations set forth the requirements for making authorized lawful deductions from employee wages under Section 193 of the New York Labor Law (NYLL), plus describe the mandatory requirements for recovering overpayments due to clerical or mathematical errors, or for repayment of wage advances. Employers have been waiting for clear guidance from the NYSDOL on this issue since June 2012, when Section 193 of the NYLL was amended to restore employers' ability to make deductions from employee wages in a number of limited circumstances.

The amended Section 193 of the NYLL prohibits any deduction from employee wages, except deductions that are made in accordance with laws, or "any rule or regulation issued by a government agency," or are "expressly authorized in writing by the employee" and "are for the benefit of the employee" so long as the "authorization is voluntary and only given following receipt by the employee of written notice of all terms and conditions of payment and/or its details and the details of the manner in which deductions will be made." (Emphasis added.) Read Proskauer's June 28, 2012 client alert. The details were left to the NYSDOL to promulgate, which it has now finalized.

The amended statute authorizes deductions for these limited purposes:

(i)      insurance premiums and prepaid legal plans;

(ii)     pension or health and welfare benefits;

(iii)    contributions to a bona fide charitable organization;

(iv)    purchases made at events sponsored by a bona fide charitable organization affiliated with the employer where at least twenty percent of the profits from such event are being contributed to a bona fide charitable organization;

(v)     United States bonds;

(vi)    dues or assessments to a labor organization;

(vii)   discounted parking or discounted passes, tokens, fare cards, vouchers, or other items that entitle the employee to use mass transit;

(viii)  fitness center, health club, and/or gym membership dues;

(ix)    cafeteria and vending machine purchases made at the employer's place of business and purchases made at gift shops operated by the employer, where the employer is a hospital, college, or university;

(x)     pharmacy purchases made at the employer's place of business;

(xi)    tuition, room, board, and fees for pre-school, nursery, primary, secondary, and/or post-secondary educational institutions;

(xii)   day care, before-school and after-school care expenses;

(xiii)  payments for housing provided at no more than market rates by nonprofit hospitals or affiliates thereof; and

(xiv)  similar payments for the benefit of the employee.

Prohibited Practices

The new regulations prohibit deductions from wages for, among other things:

  1. If not done in accordance with law, rule, or regulation;
  2. Not authorized for the benefit of the employee;
  3. Recoveries of overpayments or advances which do not adhere to the timing, manner, frequency and procedural requirements set forth in the regulations, including a mandated dispute resolution procedure;
  4. Recoupment of unauthorized expenses;
  5. Fines or penalties for tardiness, excessive leave, misconduct or quitting without notice; and
  6. Employee purchases of tools, equipment, and attire required for work.

Deductions Authorized by the Employee

Wage deductions can be authorized by a collective bargaining agreement (CBA) or by a written agreement with the employee that is express, voluntary, and "informed." The regulations then detail the requirements for informed consent, as well as the nature of the written notice. Where the nature of a deduction may fluctuate based upon a purchase, such as meals in the company cafeteria, the notice can list a monetary range of the lowest and highest amount that can be deducted.

Notably, the regulations make clear that mere "convenience" is not a benefit and, accordingly, prohibit check-cashing fees from lawful wage deductions. At the same time, there is some leeway from the prohibition where the convenience results in a financial benefit to the employee (e.g., where the employee benefits monetarily, such as by discounted food purchased at the employer's cafeteria via a wage deduction).

The NYSDOL makes clear that the statutory catch-all phrase "similar payments for the benefit of the employee" must be related to (a) health and welfare benefits, (b) pension and savings benefits, (c) charitable benefits, (d) representative benefits, (e) transportation benefits, and/or (f) food/lodging benefits.

Deductions for Overpayments

Detailed restrictive procedures must be followed in order to make employee wage deductions resulting from a wage overpayment "due to a mathematical or other clerical error by the employer." There are Notice mandates which must be afforded the affected employee prior to taking a wage deduction, and employers must adhere to specific procedures for timing, frequency, and restrictions on the amounts which can be recovered. The regulations require that employers adopt procedures by which the employee can dispute the overpayment and terms of recovery. If an employee triggers the dispute resolution mechanism, the employer cannot commence wage deductions until "at least three weeks after a final determination."

Dispute resolution mechanisms in existing CBAs, which provide the employee as much protection as the regulations, are sufficient, but CBAs executed after the issuance of the final regulations (October 9, 2013) are sufficient only if they specifically reference §195-5.1 of the regulations.

Importantly, employers must adhere to the limitations on the periodic amount to be recovered. For example, where the entire overpayment is less than or equal to the net wages earned after other permissible deductions in the next wage payment, the employer can recover the entire amount of the overpayment in the next wage payment. However, where the recovery of the overpayment exceeds net wages, after other permissible deductions, the wage deduction to be taken cannot exceed 12.5% of the gross wages earned in the wage payment, nor can the deduction reduce the hourly wage below the statutory state minimum (starting in January, 2014, New York's minimum wage rises to $8.00/hour, increasing gradually to $9.00/hour by 2016).

Deductions for Wage Advances

An "advance," as defined in the regulations, is the provision of money by the employer to the employee based on the "anticipation of the earning of future wages." While not stated in the regulations, it would appear this definition is sufficiently broad to include advances of vacation and/or sick pay. Note, if the employer charges interest, a fee, or some amount consisting of anything other than the amount provided the employee, this would then not constitute an "advance" for which a permitted wage deduction can be made.

There are detailed requirements and procedures governing repayment of an advance. For example, prior to the advance, the parties must agree, in writing, to the timing, duration, frequency, and method of recovery. The agreement also may allow the employer to take a total reclamation of the advance through a deduction made from the last wage payment at the employee's termination. Notably, once an advance is given, "no further advance may be given or deducted until any existing advance has been repaid in full." As with wage overpayments, the employer must adopt a procedure permitting the employee to contest the amount and frequency of deductions if s/he believes they are not in accordance with the parties' written agreement. The employer must set forth its dispute procedure in the parties' agreement to ensure the employee is aware of his/her rights prior to the advance being taken.

Action Steps

Failure to adhere to the authorization, notice, amounts, timing, duration, frequency, method of recovery, and dispute resolution mandates set forth in the regulations will create a presumption that the deduction does not comply with § 193 of the NYLL. In addition, employers must keep the pertinent records for at least six years after the employee's employment ends.

In light of the above, we recommend that Employers take the following action steps:

  1. Review and update, as needed, existing wage deduction authorization forms to ensure they meet the new standards memorialized in the final regulations;
  2. Prepare Notice of Intent forms which will govern compliance to recoup wage overpayments via payroll deductions (or via a separate transaction in compliance with § 195-5.1(a), and (d)-(i) of the regulations);
  3. Prepare compliant written agreements governing advances and deductions therefor;
  4. Create dispute resolution procedures that conform to regulatory requirements for employees to contest deductions for wage overpayments and advances;
  5. Review policies and practices which may bear on these issues to ensure they are updated; and
  6. Ensure open communication between in-house counsel, Human Resources, Payroll, and line management in connection with the new legal requirements.

Special thanks to Nayirie Kuyumjian, Associate, for her assistance in preparing this alert.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions