On September 7, 2012, Governor Cuomo signed Bill Number A10785, amending Section 193 of the New York Labor Law ("NYLL") and restoring employers' ability to make deductions from employee wages in a number of circumstances that the New York Department of Labor ("NYDOL") had opined were otherwise impermissible. In addition to the limited list of statutorily enumerated permissible deductions that already existed (e.g., insurance premiums; United States bonds; pension, health and welfare benefits; union dues), the new amendments allow employers to make deductions to recover pay advances, accidental overpayment of wages, deductions for purchases made at events sponsored by bona fide charitable organizations; discounted parking passes and mass transit vouchers; gym membership dues; cafeteria, vending machine and pharmacy purchases made at the employer's place of business; tuition, room and board and fees for educational institutions; day care expenses; and payments for housing provided at no more than market rates by nonprofit hospitals. All such deductions require the employee's voluntary authorization. As discussed in our June 28, 2012 Client Alert, the New York State Assembly and Senate passed these amendments on June 21, 2012.
Section 193 of the NYLL prohibits employers from making deductions from employees' wages except those that "are made in accordance with the provisions of any law or any rule or regulation issued by any government agency"; or "are expressly authorized in writing by the employee and are for the benefit of the employee." Prior to these recent amendments, the statute limited authorized deductions to payments for "insurance premiums, pension or health and welfare benefit, contributions to charitable organizations, payment for United States bonds, payments for dues or assessments to a labor organization, and similar payments for the benefit of the employee."
As discussed in our June 2, 2010 Client Alert, the NYDOL had issued a series of Opinion Letters, beginning in late 2008, interpreting Section 193 of the New York Labor Law narrowly so as to prohibit employers from recouping accidental wage overpayments via wage deductions, as well as prohibiting employers from making wage deductions where wages had been advanced to employees and, similarly, prohibited employers from using wage deductions as the mechanism for repayment of tuition assistance – in all cases, even where the employee's consent was voluntary. The new law amends Section 193 of the NYLL, greatly expanding the employer's ability to make a number of deductions, which were held impermissible by the NYDOL over the past three or four years.
Employers Should Proceed Cautiously
Although the new amendments are welcome news for employers and employees alike, caution must be exercised before any new deduction policies are implemented. First, the new law does not take effect until November 6, 2012, sixty (60) days after Governor Cuomo signed it into law. Second, the amendments include instructions for the NYDOL to issue regulations governing the timing and frequency of such deductions, as well as additional notice requirements and a requirement that employers implement a procedure that employees may use to dispute the amount of the deductions. As a result, while some employers may move forward and enter into voluntary wage deduction agreements with employees, others may decide to await the NYDOL's regulatory pronouncements before implementing a program for the recovery of overpayments and pay advances.
Third, the amendments also include enhanced requirements for the employee's written authorization. As before, any deductions must be for the employee's benefit and authorized by the employee in writing voluntarily. The new amendments require the authorization to be "voluntary and only given following receipt by the employee of written notice of all terms and conditions of the payment and/or its benefits and the details of the manner in which deductions will be made." The employer must maintain any written authorizations throughout the employee's employment, as well as for six years after employment ends. Additionally, the employee may freely revoke written authorization in writing at any time, upon which the employer must cease the deductions "as soon as practicable, and, in no event more than four pay periods or eight weeks after the authorization has been withdrawn, whichever is sooner."
Fourth, the amendments contain a "sunset provision" that automatically extinguishes the newly identified wage deductions on November 6, 2015, three (3) years after they came into effect. The Legislature will, therefore, have to revisit this issue at a later date in order to review the amendments and determine whether they are working as intended in order to revoke the "sunset provision."
Finally, while the new law restores the "playing field" to a time prior to late 2008, permitting employers and employees to voluntarily agree to wage deductions for their mutual benefit without resort to lawsuits for recoupment of wage advances/loans or terminations for alleged theft (due to inadvertent overpayment or failure to reimburse for personal expenses), the list of permissible wage deductions is limited to fourteen categories, including a catchall for "similar payments for the benefit of the employee." As such, until the NYDOL weighs in with its regulations, it remains unclear how broadly, or narrowly, it will interpret the aforementioned "catchall." While personal expense charges may be characterized as a form of a wage advance, the best course of action, pending the regulations, is to consult with your Human Resources professionals and counsel to discuss the best manner in which to proceed.