The New York State Department of Labor ("NYSDOL") issued final regulations last week governing how employers may make certain types of deductions from employee wages authorized under the New York Labor Law. For years, there were very few exceptions to the Law's general prohibition on wage deductions. This changed last year, when the New York Labor Law was amended to expand the scope of allowable deductions.
In order to take advantage of the broadened bases for making wage deductions, employers must now also comply with the Regulations. There are three types of permissible deductions that the Regulations address: those for the benefit of employees, those for the recovery of overpayments due to clerical or mathematical errors, and those for the repayment of advances.
Deductions allowed for the benefit of employees are limited to only certain types of payments set forth in the New York Labor Law, for example, insurance premiums; pension, health, and welfare benefits; dues or assessments to a labor organization; discounted parking or passes, cards, etc. that allow an employee to use mass transit; day care and before- and after-school expenses; and "similar payments for the benefit of the employee." The Regulations define categories of payments that will generally qualify as "similar payments" and therefore for which deductions will be allowed, as well as set forth types of prohibited deductions. It is not enough, however, that a deduction is for one of the payment types permitted. The Regulations require authorizations for the deductions. The authorizations must include certain information and be provided at certain times, and employees must be given an opportunity to review the authorizations or to have them reviewed.
Regarding deductions for overpayments, the Regulations include requirements as to timing and duration, frequency, method of recovery, and limitations on the amount of such deductions. Employers must not only provide employees with a notice of intent that meets certain specifications with respect to both content and timing, but also establish a procedure for challenging an overpayment and its recovery. Critically, the procedure must have certain features, and not allowing employees to avail themselves of the procedure creates a presumption that the deduction was illegal.
Perhaps of most interest to employers is the section of the Regulations concerning deductions for advances. There was some uncertainty under the earlier, proposed version of the regulations as to whether paid time off, sick days, and vacation days are "advances" and thus whether deductions may be made for such fringe benefits. In its Notice of Adoption for the Regulations, the NYSDOL addressed commentators' questions about whether the Regulations cover advanced paid time off such as sick days and vacation days. In response, the NYSDOL confirmed that the Regulations "apply to any circumstance where the employer is providing money to an employee for work not yet performed by the employee, and recouping that money through a deduction. A deduction from future earned paid time off is to be treated the same as a deduction from future wages." Like deductions for overpayments, then, in order to make deductions for advances, employers must comply with specific procedures, including the use of authorizations and implementation of a special process for employees to challenge the deductions.
All documents that the Regulations require may be provided to employees in writing or through electronic means, including e-mail. Employers must also retain any authorizations for at least six years after the worker's employment ends.
Take-Away
Deductions from employee wages can mutually benefit employees and employers. Before making such deductions, however, New York employers need to ensure both that the deduction is one permitted by law and that required procedures are followed for the specific type of deduction to be made. Although the procedures required under the Regulations are not necessarily onerous, implementing them requires some advanced planning and attention to key details, including policies and forms. BakerHostetler attorneys are here to assist management in fully complying with the newly finalized Regulations as well as with the laws and regulations of other states that also govern deductions from employee wages.
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.
