New York State Department of Labor Publishes Final Wage Deduction Regulations

The regulations set forth detailed procedures for employers to follow in order to recover wage over-payments and advances by payroll deduction under section 193 of the New York State Labor Law. Key portions of the regulations are outlined below.

Permitted Deductions

Employers are only permitted to make wage deductions that fall within the following four categories:

• Deductions made in accordance with any law, rule or regulation issued by any governmental agency;
• Deductions specified by, or similar to those specified by section 193 of the New York State Labor Law that are authorized by and for the benefit of the employee (see below);
• Deductions for the recovery of payroll overpayments made in accordance with the regulations; and
• Deductions for the repayment of wage advances made in accordance with the regulations.

Employers may also make wage deductions permitted by laws, rules or regulations issued by any governmental agency, such as:

• recovery of payroll over-payments;
• repayment of salary advances;
• pre-tax contribution plans approved by the IRS; and
• wage garnishments and levies for child support and taxes.

Similar Deductions for the Benefit of the Employee

Wage deductions that are authorized by and for the benefit of the employee under New York State Labor Law section 193(1)(b) are limited to the permitted deductions specifically listed in section 193, and to similar payments for the benefit of the employee.

Deductions are considered to be for the benefit of the employee when they provide financial or other support for the employee, the employee’s family, or a charitable organization. Similar deductions for the benefit of the employee must fall into one of the following categories in order to be permissible:

• health and welfare benefits;
• pension and retirement benefits;
• child care and educational benefits;
• charitable benefits;
• dues and assessments;
• transportation; and
• food and lodging.

Wage deductions may provide for some level of convenience to employees in facilitating payments. However, convenience to employees alone will not be recognized as a benefit in order to determine whether a wage deduction is for the benefit of employees.

Prohibited Deductions

Examples of prohibited deductions under section 193(b)(1) of the New York State Labor Law include:

• Repayment of loans, advances, and over-payments that are not in accordance with the proposed regulations;
• Employee purchases of tools, equipment and attire required for work; recoupment of unauthorized expenses;
• Repayment of employer losses, including spoilage and breakage, cash shortages, and fines or penalties caused by the conduct of the employee;
• Fines or penalties for tardiness, excessive leave, misconduct, or quitting without notice;
• Contributions to political action committees, campaigns and similar payments; and
• Fees, interest or the employer’s administrative costs.

When Are Wage Deductions Considered Authorized By Employees?

Permissible wage deductions will be considered authorized by an employee if they are express, written, voluntary (in a collective bargaining agreement or in a written agreement between the employee and employer). The agreement must also contain all terms and conditions of the wage deduction, including the benefit to the employee and the way the deduction will be made. Employers must obtain authorization before deductions are made and before any substantial change in the terms of a wage deduction.

Employer Takeaway

It is essential for employers to review their wage deduction policies and fully understand these New York DOL regulations prior to making any deductions from an employee’s paycheck.