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September 12, 2012

Governor Cuomo Signs Into Law Wage Deduction Bill

On September 7, 2012, Governor Andrew Cuomo signed into law Bill Number A.10785, which the New York State Senate and Assembly had previously passed on June 21, 2012 (see our previous alert on 06/22/12, New York State Legislature Passes Wage Deduction Bill). The Wage Deduction Law will allow employers to make deductions from wages for a broader category of services provided to employees. Additionally, in certain cases, the law will allow employers to deduct wages as a means of recapturing overpayments or repayment of loans. The law is set to take effect on November 6, 2012 (sixty days after Governor Cuomo signed it into law), and will be in effect until November 6, 2015 (three years after taking effect). 

The Wage Deduction Law amends Section 193 of the Labor Law. Currently, employers are allowed to make deductions from employee wages for a limited number of services provided to the employees, including insurance premiums; pension, health and welfare benefits; contributions to charitable organizations; payment for United States bonds; and payment of union dues.

Under the new law, employers may now also make deductions from employee wages for the following payments: prepaid legal plans; purchases made at events sponsored by a bona fide charitable organization; discounted parking, or means for employees to use mass transit; gym membership dues; cafeteria, vending machine, and pharmacy purchases made on the employer’s premises where the employer is a hospital, college or university; tuition, room, board, and fees for educational institutions; day care expenses; and payments for housing provided at no more than market rates by non-profit hospitals.

Beyond expanding the category of services for which employers may deduct wages, the law also has significant ramifications with regard to overpayments and employee loans. Notably, the Wage Deduction Law will allow employers to use wage deductions as a means of recapturing overpayments made due to clerical error. The law will also allow employers to recover salary advancements via wage deductions. Both aspects of the legislation represent a significant departure from previous practice, and provide employers with a more efficient avenue to collect overpayments and advancements.

Of particular importance is that any wage deduction requires prior written employee consent. Such authorization must be kept on file at the employer’s premises during the length of the employment relationship, and for a period of six years thereafter. In order for such consent to be valid, employers must provide employees with written notice of the terms and conditions of the payment, and the manner in which deductions will be made. Furthermore, employers must make efforts to notify employees of any substantial change in the terms or conditions of the payment as soon as practicable; and in the case of any increased deduction, the employer must notify the employee in advance of the change. Finally, employees may freely revoke their authorization at any point in writing, unless such deductions are governed by an existing collective bargaining agreement.

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If you have any questions regarding the Wage Deduction Law, please do not hesitate to contact us. 

Putney, Twombly, Hall & Hirson LLP