2013 – When an Employee Owes Money to Your Company

Collection Efforts under the New York Labor Law

Until recently, New York law[1] prohibited employers from making deductions from an employee’s wages, other than: (1) deductions required by law or (2) deductions that are expressly authorized by the employee in writing and that are for “the benefit of the employee.” The New York State Department of Labor construed this second exception as limited to deductions for insurance premiums, pension or health benefits, charitable contributions, and dues for labor organizations, and a limited number of similar deductions.

Deductions for “Repayment of loans, advances or debts” owed by the employee to the employer were strictly prohibited according to the NY Department of Labor[2].

The scope of permissible wage deductions was expanded effective November 6, 2012[3] after Governor Cuomo signed legislation amending the New York Labor Law[4]. As a result the following deductions may now be taken by employers, but only with the employee’s written consent:

  • prepaid legal plans;
  • purchases made at events sponsored by a charitable organization affiliated with the employer;
  • 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;
  • day care, 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.

Far more significantly, at least for some situations, the amended statute now allows deductions to recover “repayment of advances of salary or wages made by the employer to the employee”[5] but only in certain circumstances. Section 193 (d) now provides:

“Deductions to cover such repayments shall be made in accordance with regulations promulgated by the commissioner for this purpose, which regulations shall include, but not be limited to:

[1] provisions governing: the timing, frequency, duration, and method of such repayment;

[2] limitations on the periodic amount of such repayment;

[3] a requirement that notice be provided to the employee prior to the commencement of such repayment;

[4] a requirement that the employer implement a procedure for disputing the amount of such repayment or seeking to delay commencement of such repayment;

[5] the terms and content of such a procedure and

[6] a requirement that notice of the procedure for disputing the repayment or seeking to delay commencement of such repayment be provided to the employee at the time the loan is made.”

Although more than six months have passed since Governor Cuomo signed the amendment into law[6] the Labor Commissioner has not yet promulgated the regulations with procedures that employers must follow to take advantage of the new law. Therefore, we recommend that employers refrain from making wage deductions to repay salary advances or other loans until the regulations are issued.

However, if the employer must act before the regulations are issued, affirmative steps may be taken to increase the likelihood that collection efforts will comply with the new law. Our office can assist you in your compliance efforts.

If you have any questions about wage deductions, or about the wage and hour laws generally, or any other legal issue involving employers or their businesses, please contact Richard Waxman at:


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© Richard H. Waxman 2013

[1]  NY Labor Law Section 193

[2]  See e.g. July 2010 NY Department of Labor wages poster, a copy of which is attached to this Newsletter.

[3]  Please note that the amendment will “sunset” three years later on November 6, 2015

[4]  A copy of the amended Section 193 may be found at:  http://www.labor.ny.gov/formsdocs/wp/LS605.pdf

[5]  Section 193 (d) of the amended law also permits deductions to recover “an overpayment of wages where such overpayment is due to a mathematical or other clerical error by the employer.”

[6]  The bill was signed on September 7, 2012.