Governor Cuomo signed the Wage Deduction Bill (the “Bill”) into law on September 7, 2012, amending New York’s Labor Law § 193 relating to employee wage deductions. The Bill, which takes effect 60 days following enactment, expands the scope of permissible wage deductions under New York Labor Law to include a number of categories previously prohibited. Notably, the Bill contains a sunset provision providing that the amendments contained in the Bill are set to expire on September 7, 2015, 3 years following its effective date.
Prior to the Bill, employers could only take employee wage deductions, with the employee’s written consent, for the items that were specifically enumerated in Section 193: (1) insurance premiums; (2) pension, health, and welfare benefits; (3) contributions to charitable organizations; (4) payments for United States bonds; and (5) payments for dues or assessments to a labor organization. Additionally, wage deductions were permitted for payments similar to those enumerated “for the benefit of the employee” that, in the aggregate, did not exceed 10 percent of the employee’s gross wages for a payroll period. Both the New York Department of Labor (“NYDOL”) and state courts had construed this language narrowly, permitting additional deductions only for items closely related to the listed categories.
The Bill expands the allowable deductions under Section 193, permitting employers to make many wage deductions previously prohibited. In addition to those permitted prior to the Bill, employers may now make the following deductions from employee wages for:
• repayment of pay advances and loans;
• repayment of wage overpayments;
• costs associated with discounted mass transit tickets, passes, or user cards;
• discounted parking passes;
• fitness or health club and/or gym membership dues;
• cafeteria, vending machine, and pharmacy purchases made at the employer’s place of business, and gift shops
run by hospitals, colleges, and universities;
• tuition, room, board and fees for nursery, primary, secondary and post-secondary education costs;
• day care expenses;
• payments for housing provided at no more than market rates by non-profit hospitals; and
• additional voluntary deductions agreed on by employer and employee.
With respect to wage deductions for wage overpayments, employers must also comply with regulations promulgated by the Commissioner of Labor regarding: the types of payments that will be covered; the timing, frequency, duration and method of recovery or repayment; limitations on the periodic amount of such recovery or repayment; and notice to employees before commencing the recovery or repayment, including notice of procedures for disputing any overpayments or delaying the start of recovery or repayment.
Additionally, prior to making any deduction, the employer must not only obtain written consent from the employee, but also must provide the employee with a writing detailing the purpose of the deduction and the manner in which it is made and must notify theemployee of any significant changes in any such deduction. It is the employer’s choice as to whether to offer any or all of the permissible deductions to its employees, and it is then the employee’s choice whether he/she would like to authorize the deduction, an authorization that is revocable at any time. The Bill also requires that employers keep these authorizations on file for the period the employee is employed and for six years after such employment ends.
Effect of the Bill on Employers & Employees
As stated in Governor Cuomos’s memorandum regarding the Bill, the law prior to the amendments “unduly restrict[ed] employees from deducting payments from their paychecks for valuable services provided by employers. This [was] disadvantageous to both employers and employees.” Employers are now able to more easily provide valuable goods and services to their employees, a change that benefits both employer and employee. However, employers must be sure to comply with the heightened notice requirements because an essential objective of the Bill is to ensure that employees are fully informed of the terms associated with all voluntary deductions.
If you have any additional questions about the wage deduction amendments or any other labor or employment issue, please contact any of the attorneys in our Labor & Employment Practice Group.
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