The New York Department of Labor (DOL) released proposed regulations addressing the November 2012 ... procedures comply
JUNE 2013
LABOR & EMPLOYMENT >> ALERT NEW YORK DEPARTMENT OF LABOR RELEASES PROPOSED REGULATIONS ON DEDUCTIONS FROM WAGES The New York Department of Labor (DOL) released proposed regulations addressing the November 2012 amendment to the wage deductions law. The amendment made it permissible to make deductions from wages to recoup overpayments or advances, but the new law only allows these deductions if made in accordance with DOL regulations. The proposed regulations specify the requirements for these two new categories of permissible deductions but, notably, are silent on whether it is permissible for employers to make wage deductions to recoup advanced vacation days. Interested parties have until July 6, 2013 to submit comments, after which time the DOL will issue final regulations.
DEDUCTIONS TO RECOUP OVERPAYMENTS The amended statute permits employers to make deductions from wages to recoup “an overpayment of wages where such overpayment is due to a mathematical or other clerical error by the employer.” The proposed regulations state that in order to make this type of deduction, an employer must satisfy all of the following requirements. Notice An employer must provide the employee with notice of its intent to make deductions at least three days prior to taking a single deduction to
THE BOTTOM LINE Employers who postponed making wage deductions to recoup overpayments and advances pending release of these regulations may now make preparations to implement these deductions. Employers who have already been making deductions based on the amendment to the statute should make sure that their deductions procedures comply with the proposed regulations. Employers must remain wary, however, of making deductions from final paychecks to recover advanced vacation time, because it appears that those deductions will not comply with the regulations as currently drafted. Davis & Gilbert will provide updates once the DOL issues its final regulations.
recoup an entire overpayment and at least three weeks prior to implementing a series of multiple deductions over time (see “Limitations on the Periodic Amount of Recovery” paragraph below). The notice must include: >>> The amount overpaid in total and per pay period; >>> The total amount to be deducted;
>>> A statement that the employee may contest the overpayment; >>> The deadline for any such contest; and >>> The procedure for contesting the deduction and/or terms of recovery, or a reference to where this procedure can be located (see “Procedure” paragraph below for more on the required procedures).
>>> The date each deduction shall occur followed by the amount of each deduction; >> continues on next page
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JUNE 2013
LABOR & EMPLOYMENT >> ALERT Timing and Duration An employer may only recover overpayments made in the eight weeks prior to the issuance of the notice described above, but the employer may make the deductions over a period of up to six years from the original overpayment. In other words, if an employer discovers that it has been overpaying an employee for a year, it can only recoup through wage deductions the past eight weeks of overpayments (assuming it immediately issues the required notice), but it can spread out those deductions over a six-year period. Limitations on the Periodic Amount of Recovery If the entire overpayment is less than or equal to the net wages earned by the employee in the next wage payment following the notice (after other permissible deductions such as for taxes and insurance premiums), an employer may recover the entire amount of these overpayments in that next wage payment. If not, an employer may not deduct more than 12.5% of the gross wages earned in any pay period and deductions may not reduce the effective hourly wage below the minimum hourly wage. Procedure Employers must implement a procedure by which an employee may
dispute an overpayment and terms of recovery and/or seek a delay in the recovery of the overpayment. The procedure must include the following, or else there will be a presumption that any contested deduction was impermissible: >>> An employee may only contest an overpayment deduction within one week from the date of the receipt of the required notice, but if the employer has the right to recover the entire overpayment in the next wage payment, the employer is required to delay the deduction only if the employee contests it within two days following receipt of the deduction notice; >>> The employer must reply to an employee’s contesting the deduction within one week of receipt, and the reply must address the issues raised by the employee’s response and contain a clear statement indicating the employer’s position with regard to the overpayment, including whether the employer agrees or disagrees with the employee’s position(s) regarding the overpayment and provide a reason why the employer agrees or disagrees; >>> The employer must give the employee written notice of the opportunity to meet with the employer within one week of
receiving the employer’s reply to discuss any disagreements that remain regarding the deductions; and >>> The employer must provide the employee with written notice of the employer’s final determination regarding the deductions within one week of this meeting. In making a final determination, an employer is required to consider the employee’s wage rate and whether the alleged overpayment appeared to the employee to be a new agreed-upon rate of pay. In addition, when making a final determination regarding the amount of the deduction to be made per pay period, an employer must consider any issues raised by the employee regarding the amount of each deduction. If the employee engages in these procedures, an employer may not take a deduction until at least three weeks after issuing the final determination. Frequency and Method of Deduction Employers may make deductions only once per pay period, and employers may recover overpayments by a separate transaction if they satisfy all of the above rules for wage deductions.
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JUNE 2013
LABOR & EMPLOYMENT >> ALERT DEDUCTIONS FOR ADVANCES The amended statute also permits deductions from wages for repayment of advances of salary or wages made by an employer to the employee. The proposed regulations define an “advance” as the provision of money by the employer to the employee based on the anticipation of the earning of future wages. The proposed regulations further specify that any provision of money that is accompanied by interest, fee(s) or a repayment amount consisting of anything other than the strict amount provided, is not an advance, and may not be reclaimed through wage deductions. Deductions made in repayment of an advance are only permitted as follows: Authorization/Timing and Duration Prior to an advance being given, an employee must give written authorization for deduction(s) to be made to repay the advance. The authorization must contain the amount to be advanced, the amount to be deducted to repay the advance in total and per wage payment and the date(s) when each deduction will be taken. The authorization may provide for total reclamation through deduction of the last wage payment, should employment end prior to the expiration of the recoupment. An authorization may only be revoked prior to the
actual provision of the advance by an employer. The authorization must also include notice to the employee that he or she may contest any deduction which is not in accordance with the terms of the written advance authorization. Once an advance is given, no further advance may be given or deducted until any existing advance has been repaid in full. Frequency The regulations provide that an employer may recover advances by wage deduction “no less than each wage payment.” This may be an error, as it would make more sense to state that an employer may recover advances by wage deduction “no more frequently than each wage payment,” and this language would be consistent with the requirements for recouping an overpayment through wage deduction. Procedure An employer must implement, and notify the employee in writing of, a procedure by which the employee, after receiving an advance, may dispute the amount and frequency of deductions that are not in accordance with the terms of the written advance authorization. The procedure must include the following, or else there will be a presumption that any contested deduction was impermissible:
>>> An employee must be able to provide written notice of the employee’s objection to the deduction, and >>> An employer must reply in writing to an employee’s objection as soon as practical. This reply must address the issues raised by the employee’s objection and contain a clear statement indicating the employer’s position with regard to the deduction, including whether the employer agrees with the employee’s position(s) regarding the deduction or disagrees with the employee’s position(s) and provide a reason why the employer agrees or disagrees. If the employee engages in these procedures, an employer may not take a deduction until giving its reply and any appropriate adjustments made. Any delay in repayment caused by this procedure will extend the authorized time frame within which the employer may recover the advance though deductions.
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JUNE 2013
LABOR & EMPLOYMENT >> ALERT EMAIL AUTHORIZATIONS ALLOWED The regulations specifically provide that any of the required authorizations, notices, responses, replies or determinations may be given in writing or through email or other electronic means. The regulations further specify that statements given to an employee must use “ordinary language readily understood” and must appear in a font size no smaller than a 12-point font. Finally, employers are required to keep a record of any authorizations for at least six years after the employee’s employment ends.
DEDUCTIONS FOR ADVANCED VACATION/PTO Notably, the proposed regulations do not specifically address wage deductions to recoup advanced vacation time. Arguably, allowing an employee to use a vacation day before the time is accrued constitutes an
“advance,” because it is essentially the provision of money by the employer to the employee based on the anticipation of the earning of future wages. But the proposed regulations may not allow employers to take this position because it may not be possible to comply with the proposed procedural requirements. Given that the employer will not know when (if at all) the employee’s employment will terminate with a negative vacation balance (which is when an employer would want to make a deduction), it will be impossible to get an advance written authorization for the deduction that would specify when the deduction will be made. Because employers will not be able to satisfy this requirement, deducting from a final paycheck to recover a negative vacation balance will likely violate the wage deduction laws.
FOR MORE INFORMATION Gregg L. Brochin Partner 212.468.4950
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