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Navigating The Legal Aspects Of Wage Deductions In New York

A pair of paychecks on a table.

On paper, employers and employees have a fairly straightforward relationship. However, the details and legal implications surrounding wage and hour compliance can be complex. New York, which has a stricter wage and hour policy than many other states, expects employers to act in the best interest of their employees, which may mean certain restrictions and requirements must be met.

One such area of labor laws in New York is wage deductions, which have seen numerous shifts in the last several decades. Wage deductions are an important part of the employer-employee relationship, and can help simplify transactions and benefit both parties. However, an unscrupulous employer could use such transactions to take advantage of their employees. This is why the state of New York restricts wage deductions to certain circumstances.

For more information on wage deductions and compliance, consider speaking with a skilled business litigation and employer defense attorney from Schwab & Gasparini. Schedule a consultation by calling the relevant office at (315) 422-1333 in Syracuse, (518) 591-4664 in Albany, (914) 304-4353 in White Plains, or (914) 304-4353 in Hudson Valley.

What Are Wage Deductions?

Wage deductions are any portion of an employee’s pay that is withheld from the employee for any purpose. These are generally to cover an expense or deduction that the employee would have had to pay on their own, eliminating any confusion and completing the transaction quickly.

Many companies withhold funds for tax purposes for their W2 employees. In addition, some insurance plans, health benefits, labor organizations, or even charitable donations can involve wage deductions. However, the New York State Department of Labor only allows certain wage deductions under certain circumstances.

When Are Wage Deductions Permitted?

While wage deductions can be helpful tools for an employer, and in some cases may be required or permitted by law, there are also many restrictions that define when a wage deduction is permissible. Understanding when wage deductions are permissible can help protect an employer from unknowingly violating labor laws and causing legal issues.

For more information on wage deductions in New York, consider speaking with an experienced employer defense attorney from Schwab & Gasparini.

Clerical or Mathematical Errors

When dealing with large sums of money, accounting errors are bound to happen. Companies often have many employees, and keeping track of hours worked, wages, and every other factor can be difficult. If an employee is overpaid, a wage deduction may be permissible to correct the mathematical error. However, advance notice is required to be provided to the employee, and certain criteria must be met to ensure the matter is being handled properly. Careful documentation of this process may help avoid future complications or challenges.

Repayment of Advances

Some employees take on advances from their employers, under the assumption of future payment. These advances can be beneficial to employees who need their funds quickly. In cases such as these, wage deductions may be allowed to repay the advances that the employee has taken already.

This is not directly taking wages from the employee, but paying back an agreed-upon debt that the employee took on. However, as employers are not legally permitted to give out official loans, these advances are not allowed to be charged interest or other fees.

Employee Permission

However, as is often the case with legal matters, a properly signed and agreed-upon contract may circumvent some of these issues. Generally, should the wage deductions fall within a certain set of categories, written permission and a signed contract from an employee may enable employers to take additional withdrawals. These deductions must be on the list of approved categories provided by the state, according to 12 NYCRR § 195-4.

However, these wage deductions are limited by New York wage and hour laws to only those deductions that are for the benefit of the employee. Any deductions that are not required by law, righting a clerical error, or repaying an advance must be voluntary deductions that are approved and expressly authorized by the employees themselves.

In Accordance With Any Law

However, there are certain exceptions in which a wage deduction may be instated regardless of an employee’s wishes, such as with alimony or child support. These deductions, even if involuntary, are allowed so long as they are in strict compliance with the appropriate laws and statutes.

Other wage deductions that may be protected by law are withholdings for accounts approved by the IRS and others approved by the government. These wage deductions may also include the aforementioned clerical errors and repayment of advances.

Prohibited Deductions

However, several wage deductions are expressly prohibited by the state labor laws. Understanding these can help prevent breaches of labor laws and failure of the relevant audits. Some of these prohibited deductions are the repayment of advances or clerical errors that are not specifically covered by section 195-5 of the New York Labor Code. Additionally, wage deductions for unauthorized expenses, purchase of relevant tools or attire, or fines for tardiness or misconduct are all prohibited by state law.

Legal Consequences of Improper Deductions

Wage deductions can be useful tools, but they can also be harmful if used improperly. New York is generally stricter with wage and hour compliance laws than some other states, which means an audit could reveal that wage deductions are being misused.

If this is happening, it would likely mean that employee wages are being held without their consent or best interests at heart. This could lead to low morale, conflicts, or even litigation in extreme circumstances. Ensuring compliance with these labor laws can help avoid this and help your business thrive with well-supported and productive employees.

Speak With a New York Employer Defense Attorney Today

Wage deductions can be tricky in New York, as can navigating other aspects of wage and hour compliance. For businesses of any size, treating employees well and ensuring their well-being is often a high priority. Therefore, taking measures to use wage deductions effectively and for the employee’s benefit can help with this. In addition, by providing clear documentation and contracts for employees to ensure that all deductions are legal and voluntary, the employer can help protect the company’s interests.

For more detailed information on wage deductions, consider speaking with a skilled New York business litigation and employer defense attorney from Schwab & Gasparini. Schedule a consultation today by calling the relevant office at (315) 422-1333 in Syracuse, (518) 591-4664 in Albany, (914) 304-4353 in White Plains, or (914) 304-4353 in Hudson Valley.

Sun Jan 19 2025, 12:00am