Articles

NY Labor Law governs what deductions may be made from an employee's paycheck. The NY Department of Labor has strictly interpreted the NY Labor Law as prohibiting almost any deduction not specifically permitted under the law. The NY Labor Law was amended in 2012 to expand the list of permissible wage deductions. That law, which was scheduled to sunset last month, has been extended until November of 2018.

What Deductions Are Permitted?

Some common deductions that employers make from employees' paychecks are for taxes, the employee portion of health insurance premiums, 401K contributions and wage garnishments. New York employers are permitted to make deductions from the wages of employees only in very limited circumstances.  For example, NY Labor Law allows employers to make the following deductions from an employee's wages:

• deductions that are made in accordance with a law (for example wage garnishments).
• deductions that are related to recovery of an overpayment of wages where such overpayment is due to a mathematical or other clerical error by the employer.  Such deductions must be made in compliance with Department of Labor regulations.
• deductions for repayment of advances of salary or wages. An "advance" is defined as the provision of money by the employer to the employee based on the anticipation of the earning of future wages.  "Advances" specifically exclude the provision of money which is accompanied by interest, fees or a repayment amount consisting of anything other than the strict amount provided.  Such deductions must be made in accordance with Department of Labor regulations. 
• deductions that are expressly authorized in writing by the employee and are for the benefit of the employee such as:
• payments for insurance premiums;
• pension or health and welfare benefits;
• contributions to bona fide charitable organizations;
• payments for United States bonds;
• dues or assessments to a labor organization;
• fitness center, health club and/or gym membership dues;
• transportation benefits such as discounted parking or discounted passes, tokens, fare cards or vouchers; or
• day care expenses.

What Deductions Are Not Permitted?

The following deductions from wages are prohibited under NY Labor Law:

• repayments of loans, advances and overpayments that do not comply with the Department of Labor's regulations.
• 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.
• fees, interest or the employer's administrative costs.

While the circumstances under which deductions from wages is permitted in NY State has been expanded in the last few years, deductions from an employee's wages still may only be made in limited circumstances.  Special care must be taken to ensure that all deductions from an employee's paycheck are either expressly permitted under the law or are "for the benefit of the employee" as defined in Department of Labor regulations.  Even in cases when deductions are permitted, care must be taken to ensure that such deductions comply with the detailed NYS Department of Labor regulations in regard to timing, notice and authorization.  For more information about wage deduction laws and our firm's representation of small businesses, please contact  Michael F. McConville, or Mary E. Ognibene.

This publication is intended as an information source for clients, prospective clients, and colleagues and constitutes attorney advertising. The content should not be considered legal advice and readers should not act upon information in this publication without individualized professional counsel.