New Law In New York Regarding Wage Deductions

September 30, 2012 | Employment & Labor

On September 7, 2012, Governor Cuomo signed a new law, effective November 6, 2012, which amends Section 193 of the New York State Labor Law (the New York wage deduction statute).  As many of you are aware, over the last few years the New York State Department of Labor has taken the position in cases and opinion letters that many payroll deductions, including salary advance repayments and various discount or other employer deductions authorized by employees were improper.  The new law specifically authorizes certain additional wage or payroll deductions but also imposes new regulatory and paperwork requirements on employers with respect to all wage deductions.

Allowable Deductions

Payroll deductions which will now be deemed acceptable by statute include deductions for: 

  1. prepaid legal plans; 
  2. purchases made for events sponsored by charitable organizations; 
  3. discounted parking passes, phone cards, health clubs and gym memberships; 
  4. cafeteria purchases, and other purchases made within the employer’s place of business; 
  5. room and board fees, if applicable; 
  6. reimbursements for tuition at preschool, nursery, primary and post-secondary institutions; and 
  7. daycare and after school expenses. 

There are also special rules and requirements for deductions for purchases with respect to employers sponsored events or services such as charity events and purchases at an employees’ cafeteria, shop or pharmacy on premises.

Overpayment of Wages and Salary Advances

In addition, wage deductions to recover the prior overpayments of wages due to mathematical or clerical errors as well as wage deductions for the repayment of salary advances previously made by an employer to an employee are permitted by the new statute, provided they comply with future regulations to be adopted by the New York Department of Labor. 

These new regulations will address the size of the deductions, the timing, their frequency, their duration, the method for the deductions and limitations on the period of recovery.  The new regulations must also address the notice to be provided to the employee prior to commencement of any deductions and that the employer establish a procedure for disputing the amount of such overpayment or advance, including a process to delay commencement of such deductions until the dispute is resolved.  Details concerning these issues must await the Commissioner’s new regulations. 

It is important to recognize that the Legislation does not allow an employer to deduct from wages the cost of any breakage, damage or spoils of materials, and employers remain prohibited from taking improper deductions in an indirect manner via a separate transaction.

New Regulatory Requirements

The new law also imposes significant new paperwork and regulatory requirements with respect to all payroll deductions from wages.  First, the statute requires that the written payroll deduction authorizations must be voluntary and be given following the receipt by the employee of a written notice from the employer setting forth all of the terms and conditions of the deduction, its benefits and the details of the manner in which the deductions will be made.  If there is any change in the terms and conditions of the deductions, including a change in the manner or amount of a deduction, a new written notice must be provided by the employer  as soon as practical but in any event, before implementing any such increase or change.  All such written payroll deduction authorizations and notices must be kept on file on the employer’s premises during the period in which the employee is employed and for six years after such employment ends.  In addition, except for deductions provided by a collective bargaining agreement, payroll deduction authorizations can be cancelled by an employee at any time under the statute.

The Payment of Commissions in New York

There are also strict rules in New York regarding timing, written notice and content requirements regarding the payment of commissions by employers in New York.  First, commissions generally must be paid not less frequently than once each month and not later than the last day of the month following the month in which the commissions were earned.  The employer must also furnish a written statement regarding earned commissions in response to a written request by a commission salesperson.

More importantly, every commission agreement in New York must be in writing; signed by the employer and employee; and kept on file by the employer for not less than three years.  The written commission agreement should describe all compensation paid to the commission salesperson and specify how and when commissions and other amounts are earned, computed and paid.  The agreement should also address how and when commissions are earned and/or paid after termination of employment.  There are additional requirements regarding agreements concerning draws against commissions.  Failure to comply with these written requirements for commissions will lead to a presumption that the employee’s description of the terms and amounts of the commission agreement are correct.

There are also additional requirements for contracts between a principal and sales representatives to solicit wholesale orders in New York.

Reminder Concerning the Wage Rate Notice in New York

Finally, as we previously reported, commencing in January 2012, all employees in New York must receive and sign a Wage Rate Notice form.  This form must contain the information setting forth their wage rate, their salary exempt or non-exempt status, paydays, name and address of the employer and other statutory information.
It is important for all employers to realize that a “new” Wage Rate Notice form must be provided to every employee every year during January with updated  information as needed.  This requirement is in addition to the requirement to provide the Form to all new hires.

Conclusion

In sum, the payment of wages and commissions in New York as well as deductions from wages require strict compliance with New York laws and regulations regarding timing, notice, amounts, payments, computations, deductions, procedures, written agreements and written consents.

Related Publications


Legal updates and news delivered to your inbox