Executive Summary: New York Governor Andrew Cuomo recently signed into law an amendment to Section 193 of the New York Labor Law, which governs the deductions an employer may legally make from employees' wages. The changes become effective on November 6, 2012.
Prior to the amendment, permissible wage deductions under Section 193 were limited to those for tax withholdings, bond payments, union dues, insurance premiums, retirement contributions, charitable donations and "similar payments for the benefit of the employee." The New York State Department of Labor had recently taken a hardline position, among other things, that employers were legally barred even from recouping overpayments made to employees due to mathematical or clerical errors.
The amendment expands the categories under which deductions may lawfully be made to employees' wages. The amendment specifies a broad range of common employment-related activities and attempts to streamline the process of implementation by allowing for direct wage deductions to pay for them. The new list of permissible deductions includes:
Discounted mass transit passes;
Gym/health club membership dues;
Vending machine, cafeteria, and pharmacy purchases made at the employer's facility;
Day care expenditures;
Tuition, room and board, and fees for all levels of pre-college education costs; and
Purchases made at events run by a charitable organization affiliated with the employer.
In addition to these new permissible deductions, employers are now permitted to deduct from wages to recoup overpayments to employees due to clerical errors or salary advance.
Importantly, the amendment requires that employers provide employees advance written notice before making any deductions, including the amount of the deduction and the manner in which deductions will be made. However, several issues remain unaddressed in the amendment and will be subject to future New York State Department of Labor rules and regulations. One issue, for example, is the size of the overpayments eligible for wage deductions and whether there are limitations on the amount an employer may take in a given pay period. Other issues include the frequency and duration of such deductions, the procedures for resolving disputes that may arise, and the ability of employers to take disciplinary action against employees who do not consent to have deductions made from their pay.
All of the newly permissible deductions are subject to strict rules concerning employee consent. Employees must provide written authorization for all deductions and may withdraw their consent at any time. All written authorizations must be retained for six years following the employee's separation from the employer.
The new law contains a "sunset" provision and, in the absence of further legislative action, will expire three years from its effective date.
Employers' Bottom Line: The amendment expands the categories under which deductions may lawfully be made to employees' wages. If you have any questions about the amendment or other labor or employment-related issues, please contact the author of this Alert, Philip Davidoff, email@example.com, who is a partner in our New York City office, or the FordHarrison attorney with whom you usually work.