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.
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.
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.
To receive regular updates on New York employment laws and announcements about our free webinars, please subscribe to the Horton Law email newsletter.