A Real-Life Analysis Of The New Wage Deduction Rules In New York: What The Legislature Giveth, The Regulators Have Taketh Away

Last week, the New York State Department of Labor issued regulations to implement the 2012 amendments to New York’s wage deduction law. The amendments were enacted to facilitate employer deductions of overpayments and advances from workers’ paychecks. Although the amendments were welcome news for employers last year, few companies are likely to regard these new accompanying regulations as easing the burdens associated with making reasonable deductions from wages in New York.

Section 193 of the New York Labor Law governs wage deductions for inadvertent overpayments and for the repayments of salary or wage advances. The new amendments reversed what the Legislature regarded as overly restrictive interpretations of Section 193 that had been previously enunciated by the New York State Department of Labor (NY-DOL). Essentially, the NY-DOL had regarded as unlawful almost any type of wage deduction not explicitly allowed by statute.

On October 9, 2013, the NY-DOL issued anticipated regulations setting forth rules for employers that wish to make deductions under the law. Legal commentators have tried to describe to employers how to comply with the new rules – but a close look at the DOL’s regulations will likely discourage most businesses from giving advances or recovering overpayments to employees using wage deductions.

The new regulations are exhaustive. They consist of 13 new regulatory sections covering nine densely packed pages of procedural requirements that may prove costly to implement and maintain, especially for smaller companies. For example, the regulations require employers to create and provide specific notices, issue responses, and obtain specific authorizations within certain time periods. They also impose significant limits on the timing, frequency, and amount of deductions and obligate employers to create new dispute resolution policies and procedures in a specific manner. Any deviation, even if minor or inadvertent, from these regulatory mandates may render an otherwise valid deduction unlawful.

Employers who wish to make wage or salary deductions outside of those expressly permitted by statute (such as taxes, garnishments, insurance, etc.) should, at a minimum, revise their handbooks to comply with the final regulations. This revision should include updating the list of permissible deductions and creating new procedures setting forth deadlines for notices and establishing the necessary dispute mechanisms. After advising employees of the new policy, employers should implement the new policy with precision to guard against errors, no matter how insignificant.

But even intrepid employers may want to think twice about committing the resources and time to put into place the apparatus required to comply with the new regulations. Why? Because the new deductions law contains a “sunset” provision that automatically repeals last year’s Section 193 amendments (and these new regulations) on November 2015, unless the law is extended by further legislative action.

The full text of the final regulations can be found at www.labor.ny.gov/.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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