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October 21, 2013

New York Department Of Labor Publishes Final Wage Deduction Regulation

The New York Department of Labor (“NYDOL”) has adopted a final regulation pertaining to the expanded categories of permissible deductions under the New York Labor Law, Section § 193, effective October 9, 2013.  The final regulation is codified at 12 New York Code of Rules and Regulations Part 195.

The final regulation implements the Wage Deduction Law, which amended Section 193 of the Labor Law to loosen restrictions on employers’ ability to make deductions from employees’ wages. (See our alert of September 12, 2012: Governor Cuomo Signs Into Law Wage Deduction Bill). The final regulation is substantially similar to the proposed version issued by the NYDOL earlier this year. (See our alert of May 23, 2013: NYDOL Issues Proposed Wage Deduction Regulation).

Under the new regulation, an employer may only make deductions from wages that fall within the following four categories:

  • Any deductions made in accordance with any law, rule or regulation issued by any governmental agency;
  • Deductions specified by, or similar to those specified by, Labor Law § 193 that are authorized by and for the benefit of the employee;
  • Deductions for the recovery of overpayments made in accordance with the regulation; and
  • Deductions for the repayment of wage advances made in accordance with the regulation.

The final regulation also lists specific prohibited deductions, which include:  employee purchases of tools, equipment and attire required for work; recoupment of unauthorized expenses; repayment of employer losses, including for spoilage and breakage, cash shortages, and fines or penalties incurred by the employer through 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.

“Similar” Deductions

In addition to deductions that are authorized by, and for the benefit of, the employee that are specifically enumerated in Labor Law § 193(1)(b), employers may make deductions for “similar payments for the benefit of the employee.”  The final regulation eliminates the prior 10% cap on deductions for “similar payments” and clarifies that payments are “similar” if they fall within one of the following categories:

  • Health and welfare benefits;
  • Pension and savings benefits;
  • Charitable benefits;
  • Representational benefits;
  • Transportation benefits;
  • Food and lodging benefits.

Deductions for Overpayments

The employer must provide a notice of intent to make deductions to recover the overpayment either three days or three weeks before the deduction, depending on the amount deducted.  The notice of intent must contain: the amount overpaid, both in total and per paid period; the total amount to be deducted; the date of each deduction; the amount of each deduction; and description of the procedure by which the employee can contest the overpayment.  The employer may only recover overpayments that were made in the eight weeks prior to the issuance of the notice of intent, although the wage deductions to recover the overpayment may continue for up to six years from the original overpayment.

Only one deduction per pay period is permitted.  If the overpayment is less than or equal to the net wages earned in the next pay period, the employer may recover the entire amount in that next wage payment.  However, if the overpayment exceeds the net wages, the recovery may not exceed 12.5% of the gross wages earned in that wage payment, nor may the deduction reduce the effective hourly rate below the minimum wage.

The employer must implement a procedure for employees to dispute the overpayment and terms of recovery and/or seek a delay in the recovery of the overpayment. Dispute resolution provisions in current collective bargaining agreements will be deemed in compliance with the regulation so long as they provide at least as much protection to the employee as the final regulation. However, such provisions in future collective bargaining agreements must specifically reference the applicable dispute resolution section of the final regulation.

Deductions for Advancements

The final regulation permits employers to make deductions for repayment of advances of salary or wages.  An “advance” is defined as the provision of money by the employer to the employee in anticipation of the earning of future wages.  Any provision of money accompanied by interest or fees is not an advance and may not be recovered through wage deductions.  Only one advance is permitted at a time.  No further advance may be given or deducted until any existing advance has been repaid in full. 

Before the advance is given, the employer and employee must agree on the timing and duration of the repayment deduction in writing.  In addition, the employee must provide written authorization, which must include:  the amount to be advanced; the amount to be deducted, both in total and per wage payment; and the date(s) of each deduction.  Only one deduction per pay period is permitted.  The employer must also implement a procedure for employees to dispute the amount and frequency of deductions and must give written notice of that procedure to any employee receiving an advance.

Employers’ Next Steps

Employers should revise their policies to reflect the rules set forth in the final regulation.  Employers should also develop procedures and notices to make wage deductions for overpayments and advances, as well as adopt dispute resolution procedures for such deductions.  We are available to assist you in this regard.

If you should have any questions regarding the final regulation, the Labor Law or any other related issues, please contact us.

The minimum wage in New York will increase to $8.00 per hour effective December 31, 2013.