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June 22, 2012

New York State Legislature Passes Wage Deduction Bill

On June 21, 2012, the New York State Senate and Assembly passed a Bill (S.7790/A.10785/Governor Program Bill #49) that will allow employers to make deductions from wages for certain services provided to employees and, under certain circumstances for overpayments or repayments of loans.  The Bill is expected to be signed by the Governor.

Previously, the New York Department of Labor’s (“DOL”)  enforcement of  the existing law limited allowable payroll deductions to pension or health and welfare benefits, contributions to charitable organizations, payments for U.S. Bonds, or labor union dues or assessments and similar payments for the “benefit of employees,” a phrase which was narrowly construed. The current Bill expands on that list to include deductions for the following: transportation and parking costs; fitness center costs; tuition, room, board, and other school fees; advances of salary; and overpayments of wages due to an employer’s mathematical or clerical error.

Of particular significance for many employers are the Bill’s provisions that allow deductions for advances of salary and for overpayment of wages because of mathematical or clerical errors. Presently, the DOL forbids deductions for payroll advancements, which has often made employers reluctant to provide loans or salary advances requested by employees. The DOL’s present construction also forbids recoupment of inadvertent overpayments to employees, even where employees authorized that deductions be made from their wages in order to repay the overpayment. This new legislation, therefore, represents a significant change in facilitating employers’ ability to make advancements and to recapture inadvertant overpayments.

There are three additional permissible wage deductions that apply to specified classes of employers.  First, hospital, college or university employers may deduct cafeteria and vending machine purchases made on the employer’s premises, or for purchases made at gift shops operated by the employer.  Second, non-profit hospitals or affiliates thereof may deduct payments for housing, provided they are not in excess of market-rate housing costs.  Finally, employers affiliated with bona fide charitable organizations may deduct purchases that employees make at events sponsored by such organizations, where at least twenty percent of the profits from the event are being contributed to the bona fide charitable organization.

The Bill provides that any deduction from wages must be voluntary and authorized expressly in writing by the employee.  Employers must also notify employees about substantial changes to deduction amounts prior to making such changes.

Please do not hesitate to contact us if you have any questions regarding the legislation.