NY State Seal.jpgCo-authored by Robert Whitman and Carlos Lopez

Some good news for New York employers awaiting authorization to make wage deductions under the 2012 amendments to the state’s Labor Law:  the Department of Labor has posted draft rules on its website, indicating that the wait for official regulations may be coming to an end.

As we previously reported [here and here], the Labor Law amendments loosened restrictions on employers’ ability to make deductions from employees’ wages.  The most significant provisions permit employers to recoup inadvertent overpayments and pay advances, provided the affected employees have authorized such deductions in writing.

Although the law has been on the books for six months, employers have not yet been able to implement programs for recovery of overpayments and pay advances because the key provisions of the law do not take effect until the State DOL issues implementing regulations.  The draft rules, which will officially be published in the State Register on May 22 and open for public comment through July 6, bring us a step closer to the finish line.

As proposed, the rules would permit employers to make wage deductions for “an overpayment of wages where such overpayment is due to a mathematical or other clerical error by the employer” as follows:

  • The employer must provide notice of its intent to make deductions either three days or three weeks before the deduction, depending on the amount deducted.
  • The employer’s notice must be made within eight weeks of the overpayment, although the wage deductions to recover the overpayment may continue for up to six years from the original overpayment.
  • 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.  On the other hand, if the overpayment exceeds the net wages, recovery is limited to 12.5% of gross wages earned in that wage payment, and the deduction may not reduce the effective hourly rate below minimum wage (slated to increase to $8.00 on December 31).
  • Employers must adopt procedures for employees to dispute the overpayment, the terms of recovery, and/or the timing of the recovery.

The draft rules would also permit 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 future wages.  However, any provision of money accompanied by interest or fees is not an advance and may not be recovered through wage deductions.

Where there has been a proper advance, the draft rules would permit deductions as follows:

  • Before the advance is given, the employer and employee must agree in writing to the timing and duration of the repayment deduction.  The terms of this agreement may include total reclamation through a deduction on the last wage payment upon termination of employment.
  • Only one advance is permitted at a time. No advance may be given, or subject to deductions, until an existing advance has been repaid in full.
  • The employer must recover advances by wage deduction no less than each wage payment.
  • The employer must adopt procedures by which employees may dispute the amount and frequency of deductions, and any employee receiving an advance must get written notice of the dispute procedure.

Interested parties may submit comments on the draft rules at regulations@labor.ny.gov.  We will continue to monitor developments.