Q: Under what circumstances may an employer make a deduction from the wages of an employee?
A: During the normal course of running a business, employers often encounter situations where they need to make a deduction from the wages of an employee. These deductions can be for reasons as common as paying a monthly health insurance premium on behalf of an employee or for more unusual circumstances such as to recoup money that was paid to an employee in error.
Section 193 of the New York Labor Law imposes a blanket restriction on an employer making any deduction from the wages of an employee. The statute, however, provides for certain exceptions that allow an employer to make a deduction from an employee’s wages if the deduction is expressly authorized in writing by the employee and is for the benefit of the employee.While the statute provides a lengthy list of authorized deductions, some of the more common authorized deductions that an employer can make include (1) contributions toward the payment of insurance premiums; (2) contributions toward the payment of pension or health and welfare benefits; (3) contributions to a bona fide charitable organization; (4) payment of dues to a labor organization; (5) payments toward discounted parking or passes for use on mass transit; and (6) dues for health clubs and gym memberships. The statute also authorizes employers to make deductions for “similar payments for the benefit of the employee.”New York Courts and the Department of Labor have offered a great deal of guidance on what constitutes a similar payment for the benefit of the employee and employers should consult with their legal counsel when considering making a deduction that is not expressly authorized under the statute.
Overpayments Can Be Deducted As Of 2012
In November 2012, Section 193 of the Labor Law was amended to specifically authorize an employer to make a deduction from the wages of an employee if the deduction is related to the recovery of an overpayment of wages where the overpayment was due to a mathematical or clerical error by the employer. The amended version of Section 193 also now permits an employer make a deduction from an employee’s wages to repay the employer for an advancement of salary or wages made by the employer to the employee. Prior to November of 2012, an employer could not make deductions to recoup the overpayment of wages or advances on salary and wages. As a result, the employer’s remedies for recoupment were limited to requesting that the employee voluntarily return the money, or the commencement of a legal action to recoup the money.
An employer’s right to deduct wages for the recoupment of overpayments and repayment of advances are governed by a detailed procedure outlined in the Department of Labor’s regulations that went into effect on October 9, 2013.For instance, with respect to the recoupment of overpayments, the procedure, among other things, requires the employer to provide the employee with notice of its intent to commence the deductions to recover the overpayment. The notice is required to contain the amount overpaid, the date that each deduction will take place, and the amount that will be deducted in each pay period.In the notice, the employer also must advise the employee of his or her right to contest the overpayment and/or seek a delay in the recovery of the overpayment.An employer’s failure to follow the procedures outlined in the Department of Labor’s regulations with respect to the recoupment of overpayments will create a presumption that the contested deduction was impermissible under the law.
Deductions Must be Authorized By the Employee
With respect to deductions for advances, an employer must obtain an authorization from the employee that authorizes a future deduction to be made to repay the advance. The authorization must contain the amount to be advanced, the amount to be deducted to repay the advance in total and per wage payment and the dates that each deduction will take place. The authorization also must include notice to the employee that he or she may contest any deduction that is not in accordance with the terms of the written advance authorization. In that regard, the employer must implement a procedure that will allow the employee to dispute the amount and frequency of deductions that are not in accordance with the terms of the written authorization. As with deductions for overpayments, an employer’s failure to afford an employee with the process of contesting deductions results in a presumption against the employer that the deduction was impermissible.
It is important for employers in New York to consult with their legal counsel to ensure that they are complying with the Labor Law and Department of State regulations in all respects.An employer’s failure to do so may result in an investigation by the New York State Department of Labor and the imposition of penalties.
Are you concerned that your employer is unfairly deducting from your wages? Contact our employment lawyers in Albany for a free consultation.