Employment Law Alert
NY Legislature Expands Permissible Employee Paycheck Deductions
July 23, 2012 Written By: Joni Kletter
For many years, employers and employees in New York have been stymied by rigid legal restrictions on paycheck deductions. Even deductions that would benefit employees and that are requested by employees have been prohibited. That is about to change.
Last month, the New York State legislature passed a bill, S7790, that will give employers increased flexibility in making deductions from employees' paychecks. Currently, no deductions from an employee's paycheck are allowed except for a few categories such as Social Security, insurance premiums, health benefits and union dues. Pending the governor's approval, this bill will establish new categories of permissible wage deductions that may be taken with employee consent. In addition, the law will allow employers to make wage deductions for the purpose of recovering wage overpayments caused by clerical error, or for the purpose of repaying wage advances made by the employer to the employee.
The bill will permit wage deductions that are expressly authorized by the employee for a number of purposes. The new categories of permissible wage deductions include expenditures associated with prepaid legal plans; purchases for charitable organizations; discounted mass transit passes; gym membership dues; cafeteria and pharmacy purchases made at the employer's place of business; tuition, room, board and fees for pre-school through post-secondary education; childcare expenses; and payments for housing provided by non-profit hospitals. These new categories will not disturb wage deductions already permitted under current law.
The employer and/or employee may set a limit for each pay period on the total amount of certain employee-authorized deductions made for expenditures benefitting the employee. Once deductions are made, the employee will have access to account information regarding expenditures and deductions.
In addition to wage deductions requiring employee consent, the bill will allow deductions for the purpose of recovering wage overpayments caused by clerical error, or for the purpose of repaying wage advances made by the employer to the employee. When making deductions, employers must comply with regulations promulgated by the Commissioner of Labor. Before recovery or repayment is initiated, the regulations require an employer to give notice to the employee and implement a procedure through which an employee can dispute the amount to be recovered or repaid. Finally, the regulations will limit the size of recoverable overpayments and delineate the appropriate timing and method for recovery or repayment.
In sum, this new legislation significantly will change long-standing New York law by authorizing the application of earned wages to a broad spectrum of purposes by way of paycheck deductions.