United States: New York Department Of Labor Issues Final Regulations On Wage Deductions

In 2012, New York amended Section 193 of the Labor Law to expand those instances where employers may lawfully make deductions from employee wages. Last week, consistent with the 2012 amendments, the New York Department of Labor (DOL) issued final regulations that clarify the types of permissible wage deductions and established a mechanism that must be followed by those employers seeking to make deductions from employee wages for overpayments to employees and repayment of pay advances given to employees.

The DOL regulations, which became effective on October 9, 2013, confirm that there are four general categories of permitted wage deductions under Section 193:

  • Deductions made in accordance with any law, rule or regulation issued by any governmental agency;
  • Deductions specified by, or similar to those specified by Section 193, authorized by, and for the benefit of the employee;
  • Deductions for the recovery of overpayments provided the deductions are made in accordance with the DOL's regulations; and
  • Deductions for the repayment of wage advances provided the deductions are made in accordance with the DOL's regulations.

Deductions Made in Accordance with Law

The regulations specifically state that employers may make any deductions from employee wages that are required by any applicable law, rule or regulation issued by any governmental agency. Employers can make these deductions without first obtaining a signed authorization from the employee. Examples of such deductions include tax withholdings, wage garnishments and child support levies.

Deductions Specified in Section 193 

Under Section 193, employers are permitted to make deductions from employee wages provided they first obtain a written authorization from the employee, the deduction is for the employee's benefit and the deduction is for:

  • Health and welfare benefits;
  • Pension and retirement benefits;
  • Insurance premiums and prepaid legal plans;
  • Contributions to a bona fide charitable organization;
  • Purchase of U.S. bonds;
  • Dues or assessments to a labor organization;
  • Fitness center, health club and/or gym membership dues;
  • Discounted parking or discounted passes, tokens, fare cards, vouchers or other items that entitle the employee to use mass transit;
  • Day-care, before-school care and after-school care expense; or
  • Similar benefits for the employee.

In order for the deduction to be authorized, it must be set forth in a collective bargaining agreement, or the employer must have obtained written authorization from the employee that is express, voluntary and informed. An authorization is express, voluntary and informed when all of the terms and conditions of the deduction are set forth in writing. The authorization must be obtained "prior to the deduction being made, any [time there is a] change in the amount of a deduction, or a substantial change in the benefits of the deduction." A "substantial change" to the deduction exists, according to the regulations, whenever there is a change in the amount of the deduction, a reduction in the benefit received or a modification in the details of the manner in which the deduction is made. In those situations where the amount of the deduction may fluctuate from week to week, the regulations permit the employer to set "a range where the lowest and highest amounts that may be deducted are set forth in the notice."

The regulations also detail when a deduction is "for the benefit of the employee." The regulations note that "deductions are for the benefit of the employee when they provide financial or other support for the employee, the employee's family or a charitable organization." They specifically state that "convenience is not a benefit." Further, the regulations state that except in very limited circumstances, the employer may not obtain any financial gain from the deduction and if it does so there is a presumption that the deduction was not for the employee's benefit.

In addition, consistent with recent court rulings, the regulations note that the phrase "similar benefits for the employee" is limited to those deductions that are similar to the deductions specified in Section 193. 

Deductions for Overpayments

Under Section 193, in order for an employer to recover an overpayment made to an employee, the overpayment must be the result of a mathematical or clerical error. Assuming the overpayment is the result of such an error, the employer may recoup the overpayment under the following conditions:

  • The employer may only recover such overpayments as were made in the eight weeks immediately prior to the issuance of the Notice of Intent, as detailed below.
  • If the overpayment is less than or equal to the net wages in the next wage payment, the entire amount may be deducted, otherwise the overpayment deduction is limited to 12.5% of the employee's gross wages, provided the deduction does not reduce the employee's wages below the minimum wage.
  • Before making a wage deduction for an overpayment, the employer must provide the employee with a Notice of Intent. If the employer is recouping the entire overpayment in the next wage payment, the Notice of Intent must be given at least three days prior to the deduction; in all other cases the Notice of Intent must be provided at least three weeks before the overpayment deductions may commence.
  • The Notice of Intent must set forth the amount of the overpayment and the amount that will be deducted each pay period until the overpayment is recouped.  
  • The Notice of Intent must inform the employee that he or she can contest the overpayment, provide a date by which the employee must make any such challenge and include the procedure by which the employee may contest the overpayment and/or the terms of its recovery.
  • Unless there is an applicable collective bargaining agreement in place, the employer must set up a procedure by which employees can contest the amount of the overpayment and/or how the overpayment is recovered. The procedure must provide the employee at least one week from receipt of the Notice of Intent to challenge the proposed deduction. Should the employee make such a challenge, the employer must respond to the employee within one week. In the response, the employer must clearly state its position and provide a reason as to why the employer agrees or disagrees with the issues raised by the employee. The employee then has at least one week to provide written notice to the employer that he or she wants to discuss the matter further. The employer must then meet with the employee and within one week of such meeting provide written notice to the employee of the employer's final determination. 
  • The employer is not permitted to make the overpayment deduction until the above procedure permitting employees to challenge the deduction has run its course. 

In the event the employer fails to follow the parameters outlined above, the DOL will presume that the deduction was impermissible and in violation of Section 193.

Deductions for Advances

Similar to deductions for overpayments, the regulations set forth an elaborate protocol that must be followed before an employer may make deductions for advances given to employees. Those protocols include:

  • The employer and the employee must agree, in writing, to the timing and duration of the repayment deduction before the advance. The writing must set forth the amount of the advance, the amount the employer will deduct each pay period to recoup the advance, when such deductions will commence and that the employee can contest any deduction not in accordance with the terms of the repayment. The employee can revoke the writing at any time prior to the employer advancing the employee his or her wages; thereafter the employee cannot revoke the writing. 
  • Once an advance is given, the employer may not advance the employee additional wages until the original advance has been repaid in full.
  • The employer must set up a procedure by which the employee can challenge any deduction not taken in accordance with the writing. The challenge procedure must be provided to the employee in writing. Under the procedure, the employee must be able to submit written notice to the employer objecting to the deduction. The employer must respond to the written objection as soon as practicable and in writing provide a reason as to why the employer agrees or disagrees with the issues raised by the employee.
  • Should the employee file a written objection concerning the deduction, the employer must suspend the recoupment deduction until it provides its written response to the employee.

As with overpayment deductions, if the employer fails to follow the above protocols, the DOL will assume that the deduction was taken in violation of Section 193. Furthermore, the regulations also specifically note that the employer may not charge interest or a fee associated with the advance. 

Prohibited Deductions

Finally, the regulations provide examples of deductions that are not permitted under any circumstances. These deductions include:

  • Employee purchases of tools, equipment and attire required for work;
  • Recoupment of unauthorized expenses;
  • Fines or penalties for tardiness, excessive leave, misconduct or quitting without notice;
  • Contributions to political action committees, campaigns and similar payments;
  • Repayment of employer losses, such as losses for spoilage, breakage and cash shortages;
  • Fees, interest or the employer's administrative costs; and
  • Repayments of loans, advances and overpayments that are not made in accordance with the regulations.

Because an employer may not deduct interest from an employee's wages and there is no provision within the regulations specifically addressing loans, as opposed to wage advances, it is clear that employers may not loan employees money and recoup that loan through a wage deduction. Instead, the employer is limited to advancing wages to an employee.

The regulations clarify that before New York employers may make deductions from employee wages that are not legally required, they must obtain a written authorization from the employee detailing the reason for the deduction and its amount. Further, the employer must set up an elaborate protocol if it wants to take deductions caused by overpayments and advances. While these regulations provide welcome guidance for the employer community, they may also embolden plaintiffs' attorneys. For example, plaintiffs' attorneys may now challenge employee wage deductions asserting that because the employer did not follow the letter of the regulations the deductions were not properly authorized and seek to recoup such wage deductions as well as liquidated damages, which after the passage of the Wage Theft Prevention Act are now equal to 100% of the unlawful deduction taken. Accordingly, New York employers should work carefully with counsel to ensure that they remain compliant with New York wage and hour law.

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