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New York Wage Deduction Rules

New York Wage Deduction Rules

In addition to satisfying minimum wage and overtime requirements, employers are generally expected to pay employees all of the compensation they earn. In New York, businesses cannot withhold money from their employees’ wages unless expressly allowed by law. These New York wage deduction rules apply to all private employers, but not governmental entities such as municipalities and school districts.

New York Labor Law Section 193

Section 193 of the New York Labor Law says that “no employer shall make any deductions from the wages of an employee except deductions which” are either:

1. Made in accordance with any law or rule.

2. Voluntary, for the employee’s benefit, and expressly authorized in writing by the employee.

This category is limited to payments for:

  • insurance premiums and prepaid legal plans;
  • pension or health and welfare benefits;
  • contributions to a bona fide charitable organization;
  • purchases made at events sponsored by a bona fide charitable organization affiliated with the employer where at least 20% of the event’s profits are being contributed to a bona fide charitable organization;
  • United States bonds;
  • dues or assessments to a labor organization;
  • discounted parking or discounted passes, tokens, fare cards, vouchers, or other items that entitle the employee to use mass transit;
  • fitness center, health club, and/or gym membership dues;
  • cafeteria and vending machine purchases made at the employer’s place of business and purchases made at gift shops operated by the employer, where the employer is a hospital, college, or university;
  • pharmacy purchases made at the employer’s place of business;
  • tuition, room, board, and fees for pre-school, nursery, primary, secondary, and/or post-secondary educational institutions;
  • daycare, before-school, and after-school care expenses;
  • payments for housing provided at no more than market rates by non-profit hospitals or affiliates thereof; and
  • similar payments for the benefit of the employee.

“Similar Payments”

Given the detailed nature of most items in this list, it’s always hard to determine whether anything else would qualify as a “similar payment” falling into the last category.

New York Department of Labor regulations explain that to qualify as “similar payments” the benefits to the employee must fall into one of these categories:

  • Health and Welfare Benefits
  • Pension and Savings Benefits
  • Charitable Benefits
  • Representational (i.e., union) Benefits
  • Transportation Benefits
  • Food and Lodging Benefits

The regulations also state that “convenience” is not a benefit. Thus, employers may not, for example, deduct a fee for cashing an employee’s paycheck.

The DOL also expressly prohibits deductions for employee purchases of tools, equipment, and work clothes; fines or penalties for misconduct; and repayment of employer losses, such as spoilage, breakage, and cash shortages.

3. Related to recovery of an overpayment of wages due to a mathematical or other clerical error by the employer.

The New York wage deduction rules only allow employers to recover overpayments of wages if the overpayment was due to a mathematical or other clerical error. If that is the case, then the employer must satisfy a number of specific procedural requirements in order to recover the overpayment from future paychecks. This includes advance notice to the employee and an opportunity to appeal the finding that an overpayment occurred.

Click here for more on recovering overpaid wages.

4. Repayment of advances of salary or wages made by the employer to the employee.

As with the recovery of overpayments, the New York wage deduction rules establish many procedural parameters for recouping money advanced to employees.

Under these rules, an “advance” is any provision of money by the employer to the employee based on the anticipation of the earning of future wages. If the payment is contingent on interest accruing, fees, or a repayment amount higher than the money provided by the employer, then it does not qualify as an advance. Employers cannot recover such “loans” through payroll deductions.

To establish a wage or salary advance that the employer may recover through payroll deductions, the employee must provide advance written authorization.

New York Wage Deduction Rules Apply to Separate Transactions

The New York wage deduction rules also prohibit employers from requiring employees to make any payment in a separate transaction that could not be made as a pay deduction. There is an exception where a current collective bargaining agreement requires the payment.

This prohibition does not prevent employers from asking for repayment or pursuing legal remedies against their employees. For example, an employer could sue an employee for theft of property or not repaying a lawful loan. But the employer could not take adverse employment action because the employee doesn’t pay. (However, the employer could, of course, take appropriate discipline for stealing, losing company money or property, etc.)

Review Your Wage Deduction Practices

New York businesses could face substantial penalties for failing to pay wages due to employees. This includes making unlawful wage deductions. Beyond taxes and standard employee benefits, such as insurance coverages, there are few permissible deductions from wages in New York. If you have any questions in this area, please consult with an experienced employment attorney.

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Proposed FLSA Rules New York

Will Proposed FLSA Rules Affect New York?

On March 22, 2019, the U.S. Department of Labor formally published proposed FLSA rules that would increase the salary level for key exemptions from federal minimum wage and overtime requirements. We discussed the DOL’s proposal in an earlier post when they were first publicized. The rules would require employers to pay employees at least $679 weekly ($35,308 per year) to preserve the exemptions. However, New York law already sets a higher salary threshold for similar exemptions. But that does not mean the federal proposal won’t have an impact in the Empire State.

In case you don’t want to read further to see whether these nuances affect your organization, here’s the quick summary:

  1. The proposed FLSA rules are more likely to affect governmental employers in New York than those in the private sector.
  2. Exempt “professionals” (other than doctors, lawyers, and teachers) would now have a higher salary requirement under the FLSA than under New York State law.

New York Has Its Own Rules

New York is among the states with the highest minimum wages in the U.S. The minimum wage now varies throughout New York State based on geographic location, among other factors.

Click here for complete charts on the various New York minimum wage rates and overtime exemption salary levels.

For most occupations, the current New York minimum hourly wage ranges from $11.10 for Upstate workers to $15.00 for some employees in New York City.

In addition to the State minimum wage, New York also has overtime pay rules that are similar to those found in the FLSA. These include similar exemptions, such as the administrative, executive, and professional exemptions that the proposed FLSA rules would alter.

New York’s administrative and executive exemptions also require that employees receive a sufficient salary. In 2019, the weekly salary thresholds for these exemptions range from $832 to $1,125. Thus, New York’s requirements already exceed the $679/week level in the newly proposed FLSA rules.

But the State Rules Don’t Apply to All New York Employees

First, let’s be clear, most New York employers are subject to both the federal FLSA and the similar New York State laws. That is, employers must satisfy both. Neither trumps the other.

However, not every workplace comes under the coverage of both federal and state minimum wage and overtime laws. And the primary distinction is perhaps counterintuitive.

Generally speaking, the FLSA applies to all but the smallest employers across the United States, including New York. This includes both the private sector and the government.

By contrast, the New York minimum wage and overtime rules don’t apply to governmental entities in the State, with limited exceptions. In other words, New York villages, towns, counties, school districts, and public authorities, as well as the State itself, don’t have to follow the New York laws with respect to most employees. But they do have to comply with the FLSA. (One narrow exception, for example, is non-instructional employees of public school districts, who are subject to the State requirements as well as the FLSA.)

New York Public Employers Must Heed the Proposed FLSA Rules

New York State and its municipalities and other public entities could currently have exempt employees making less than the $35,308 per year the proposed FLSA rules would require. The current FLSA requirement is just $455 per week, or $23,660 annually.

So, public employers in New York will need to review the proposed FLSA rules to evaluate the potential impact on their workforces. Although most full-time public employees in New York probably already make at least $679 per week, some part-time exempt employees at least do not. And the FLSA salary requirement is not pro-rated for part-time employees. Preserving exemptions for part-time employees may or may not be important, depending on whether they ever work over 40 hours in a week, which would trigger FLSA overtime obligations.

The DOL’s current proposals also affect a special “highly-compensated employee” exemption. Right now, that exemption requires that the employee receive at least $100,000 in total compensation in a year. The proposed FLSA rules increase that almost to $147,414. Many New York public employers have exempt employees falling within that range. This does not mean that all of them must receive a raise, however. Many would probably also qualify for other exemptions with the lower $35,308 salary requirement.

Moreover, unlike the private sector, even supervisory employees working for public employers in New York can unionize. This increases the likelihood that exempt employees might be subject to collective bargaining agreements. If so, then changes to the terms and conditions of their employment, including compensation, might need to be negotiated with their union. Governmental entities in this situation should allow additional time to do what is necessary to come into compliance with the proposed FLSA rules by the time the DOL finalizes them–likely later this year.

The Peculiar Case of the Professional Exemptions

The proposed FLSA rules pertain to three of the so-called “white collar” exceptions to federal overtime laws: the administrative, executive, and professional exemptions. (Click the corresponding link in the previous sentence for more on these exemptions and their New York State counterparts.)

Under the FLSA, all three of these exemptions have salary components. Not so under New York law.

New York’s administrative and executive exemptions do have salary requirements. Its professional exemption does not.

Thus, New York employers only have to satisfy the FLSA salary level to exempt qualifying professional employees. This group includes both “learned” professionals like accountants and engineers and artistic professionals like painters and musicians. So, the proposed FLSA rules might require employers to pay some of these individuals more to preserve the professional exemption.

As one final caveat, the FLSA has a further special exception for doctors, lawyers, and teachers. The salary requirement does not apply to these professionals, assuming they’re working in their licensed fields. The proposed FLSA rules don’t make any changes applicable to those employees.

Proposed Rules Are Not Final Yet

Keep in mind that we’re still only talking about proposed changes to the FLSA overtime exemption rules. The public has until May 21, 2019, to submit comments on the proposals. Then the DOL will have to review them and prepare “final” rules. Though there is a reasonable chance the final rules will closely mirror the current proposals, something might change. And the impact on New York workplaces could differ from that described here.

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2019 Overtime Rule

2019 Overtime Rule Proposes $35,000 Salary Level

On March 7, 2019, the U.S. Department of Labor released new proposed rules regarding FLSA overtime exemptions. The 2019 overtime rule differs substantially from the one pursued by the Obama administration in 2016. The $35,000 threshold falls almost exactly between the current federal requirement ($23,660) and the 2016 proposal ($47,476). The DOL has not proposed changes to the duties test for the “white collar’ exemptions, but did modify other aspects of the existing regulations.

FLSA “White Collar” Exemptions

The Fair Labor Standards Act (FLSA) is a federal law requiring employers to pay minimum wage and overtime. Most employees must receive overtime for working over 40 hours in a week. Some exceptions apply. The most prevalent ones fall into the category of “white collar” exemptions.

The administrative, executive, professional, and outside sales exemptions all fall under the “white collar” rules. Of these, the first three have salary requirements. The outside sales exemption does not.

To qualify for administrative, executive, and professional exemptions, most employees must satisfy both duties and salary requirements. (There is no salary requirement for doctors, lawyers, and teachers under the FLSA professional exemption.)

Many states have separate overtime exemption requirements. Employers generally must satisfy both state and federal exemptions. In some states, the salary requirement already exceeds the new proposal. The overall impact of the FLSA 2019 overtime rule may be less in such states.

Salary Levels

In 2004, the Department of Labor set the salary threshold for the white collar exemptions at $455 per week. This equates to $23,660 annually.

Near the end of President Obama’s second term, the Department of Labor proposed and finalized an increase to the salary requirement. The 2016 rate was $913 per week, or $47,476 per year. Shortly before the increase took effect, a federal court blocked it. That court case is technically still pending on appeal.

Now the Trump DOL is pursuing this new rule to replace the blocked rule and the one that preceded it. The March 2019 proposal sets the weekly requirement at $679, or $35,308 annually. This represents almost exactly the midpoint between the 2004 (current) and 2016 (blocked) salary levels.

The March release by the DOL does not establish a $679 per week salary requirement. There will be a 60-day comment period first. Then the DOL would be able to issue a final rule. The final rule could adopt this proposal or modify it in either direction.

[Along with a salary level test comes a salary basis requirement. For more on that component of the white collar exemptions, click here.]

No Automatic Adjustment in the 2019 Overtime Rule

The 2016 rule not only doubled the salary threshold, but also established a mechanism for automatic adjustments every three years. That approach would have almost certainly increased the salary requirement at large intervals.

Instead of automatic increases, the 2019 overtime rule proposal suggests that the DOL review the salary threshold every four years. The agency could then change the requirement through new notice and comment rulemaking.

Highly Compensated Employees

Surprisingly, there is one aspect of the 2019 overtime rule proposal that is more burdensome on employers than the 2016 regulations.

The FLSA also has a “highly compensated employee” exemption. Right now, it requires that the employee receive at least $100,000 in total compensation in a year. The current proposal increases that almost by half to $147,414. By comparison, the 2016 rule would have only required compensation of at least $134,004 annually.

However, the precise amount of this change might not be a significant concern for most employers. The highly compensated employee exemption is primarily a shortcut to the traditional white collar exemptions. It applies where the employee meets the compensation threshold and also performs at least one of the duties of an exempt executive, administrative, or professional employee. Most employees who qualify for this exemption, whether at the $100,000, $134,004, or $147,414 level, would also be eligible for the full executive, administrative, or professional exemption anyway.

What Does This Mean for Employers?

For now, this is only a proposal. We are at least two months away from the DOL moving to finalize these changes. And most likely the DOL will set the new salary threshold and give employers some lead time to prepare for the increase. Ideally, the DOL might have the new rules apply beginning January 1, 2020, when many employers make annual wage adjustments anyway.

Still, it’s not too early to start planning for the increase. $35,308 might not be the exact new threshold. But it will probably be in that ballpark. If your company has exempt employees making less than that, you might have to pay them more to maintain the exemption. The alternative would be to eliminate their exemption and pay overtime as required. There are many strategies and approaches to implementing these changes. We’ll try to address some of them once the final rule comes out. So, stay tuned!

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