In a nod to the adage that nothing is constant but change, the New York Department of Labor has reversed course and now takes the position that certain deductions from an employee's paycheck, including but not limited to a mistaken overpayment, are now impermissible – even with the employee's written consent and even if the deduction does not exceed 10% of the employee's pay. Moreover, the Department now takes the position that an employee may not be disciplined for a refusal to repay an overpayment or other amount due, such as in response to an employer demand for repayment.
Section 193 of the Labor law prohibits deductions from employee wages, with specific enumerated exceptions, such as payments for insurance premiums, pension or health and welfare benefits, charitable contributions, dues and assessments to a labor organization and “similar payments for the benefit of the employee.”
The Department previously held that certain deductions from pay could be considered "for the benefit of the employee" within the meaning of Section 193 if they were wage advances or repayments of a debt to the employer as a result of the employee's receipt of an overpayment. The deduction was permissible if the employer made it during the pay period immediately following the overpayment, the employee gave a written authorization for the deduction, and the deduction was limited to 10% of the employee's wages for the pay period.
The Department no longer correlates wage overpayments (and by implication loan repayments) to the listed statutory payments “for the benefit of the employee.” Relying on two Court of Appeals decisions, in which the Court narrowly construed the statutory exceptions, the Department has decided that a qualifying deduction is one that is the equivalent of an investment of money for the future direct or indirect benefit of the employee.
The Department’s position does not affect an employer’s ability to discipline for theft or to commence legal proceedings to collect money owed; however, payroll practices that have become routine, such as salary advances followed by payroll deductions, must be reworked to ensure compliance with the Department’s current enforcement guidance.
For advice and guidance on protecting employees from identity theft, please contact Randolph C. Oppenheimer by e-mail, roppenheimer@damonmorey.com, or call 716.858.3780.
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