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
 
In association with
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
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

    Disclaimer

    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

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