Labor & Employment Law

Section 193 of the NY Labor Law and Deductions From Pay

There has been a lot of discussion of late on the subject of payroll advances, recouping employee loans and such from employee pay in New York.  And, not surprisingly, the NYS Department of Labor has changed its position on permissible deductions.

So, generally, here is the rule:  New York State Labor Law, Section 193, generally prohibits deductions from wages with few exceptions.  What would arguably apply here is the exception for a deduction 'authorized in writing by the employee' and 'for the benefit of the employee.'  These deductions are generally limited to: insurance premium, benefits, labor dues and 'similar payments for the benefit of the employee.'

Prior to January of 2010, the NYS Department of Labor took a broad view of this rule and permitted certain deductions – for example loans and other advances of payroll.  In the past several years there have been court cases in NY which have narrowed the permissible interpretation of the statute and in January of 2010, the NYS DOL reversed its previous position and now takes the following position:

• Deductions for overpayments to employees are NOT permitted, even with the employee's written consent.
• Deductions to recoup salary or benefit advances to employees are NOT permitted, even with the employee's written consent.
• Deductions for tuition payments are NOT permitted.
• Requiring the employee to pay back money owed to an employer in a separate transaction or be subject to discipline is NOT permitted.

This is my general interpretation and your particular situations will likely be fact-specific.  Thus, I suggest that if you are considering ANY of these types of deductions from an employee's pay that you seek the advice of your attorney before proceeding.

Presumably this interpretation falls in line with the letter of the law - specifically, the statute is somewhat narrowly written. It does, however, put employers and employees in a precarious position.

Full post as published by Strategic HR Lawyer on June 28, 2010 (boomark / email).