PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following action:
Action taken:
Repeal of Part 195; and addition of new Part 195 to Title 12 NYCRR.
Statutory authority:
Labor Law, section 193
Subject:
Deductions from Wages.
Purpose:
To explain the types of deduction that are authorized to be made from wages and the method by which those deductions may be made.
Substance of final rule:
Full text is posted at the following State website: www.labor.ny.gov
This rule repeals the current Part 195 and adds a new Part 195, effective October 9, 2013. This rule shall expire upon the expiration and repeal of Chapter 451 of the Laws of 2012.
195-1.1 provides that the purpose of the part is to establish provisions governing authorized deductions for the benefit of employees, for the recovery of overpayments due to clerical or mathematical errors, and for repayment of advances.
195-1.2 Provides to whom the regulation applies and that the regulation requires continued compliance with other laws relating to company stores and wage deductions.
195-2.1 Provides that wage deductions are prohibited unless they are (1) deductions made in accordance with any law, rule or regulation issued by any governmental agency; (2) deductions specified by, or similar to those specified by, section 193 of the Labor Law, authorized by, and for the benefit of, the employee; (3) deductions for the recovery of overpayments made in accordance with the proposed regulation; and (4) deductions for the repayment of wage advances made in accordance with the proposed regulation.
195-2.2 Provides that no employer engaged in performing a public work shall operate a company store if there is a store within two miles of the work site and provides that no deduction shall be made for groceries, provisions, board, lodging or clothing.
195-3.1 Provides that deductions from wages may be made in accordance with a government’s law, rule or regulation.
195-4.1 Provides that deductions for the benefit of the employee are authorized if they are listed in Labor Law § 193(b) (1) or are a “similar deduction for the benefit of the employee.”
195-4.2 Provides when an employer must seek authorization for a deduction for the benefit of an employee, and provides that such a deduction is authorized if agreed to in a collective bargaining agreement or a written authorization signed by the employee prior to the deduction being made and provides for notice of the deduction to the employee.
195-4.3 Provides that deductions for the benefit of the employee are those listed in Labor Law § 193(b) (1) or those that are: health and welfare benefits; pensions and retirement benefits; child care and educational benefits; charitable benefits; dues and assessments; transportation; and food and lodging. Also provides for deductions that may be made when the employer receives a financial gain and deductions that are prohibited.
195-4.4 Categorizes the deductions that may be made for payments listed in Labor Law § 193(b) (1).
195-4.5 Lists some payments that are not similar and for the benefit of the employee.
195-5.1 Provides the following for deductions for overpayments where such overpayment is due to a mathematical or other clerical error made by the employer: (1) the timing and duration of the deduction; (2) the frequency of the deduction; (3) method of recovery of the overpayment; (4) limitations on the periodic amount of recovery for the overpayment; (5) the timing and contents of a notice of intent to make the deduction; and (6) the procedure that an employee may take if he or she chooses to contest the deduction.
195-5.2 Provides for deductions from an employee’s wages for repayment of advances of salary or wages made by the employer. This section provides for: (1) timing and duration of the deduction; (2) the frequency of the deduction; (3) the method of recovery of the advance; (4) limitations on the periodic amount of recovery; (5) authorization for the deduction; and (6) implementation of and a procedure for an employee to contest the deduction.
195-5.3 Provides for the format and method of transmission of authorizations and notifications.
Final rule as compared with last published rule:
Nonsubstantive changes were made in sections 195-4.2(a), 195-5.1(f)(4), (i), 195-5.2(b), (c) and (f).
Text of rule and any required statements and analyses may be obtained from:
Amy C. Karp, Legislative Counsel, New York State Department of Labor, State Office Campus, Building 12, Room 509, Albany, NY 12240, (518) 457-7350, email: Regulations@labor.ny.gov
Revised Regulatory Impact Statement
Statutory Authority: Labor Law §§ 21(11), 193 and 199.
Legislative Objectives: The purpose of the authorizing legislation is to allow additional specifically stated deductions for the benefit of an employee; permit the recovery of overpayments due to clerical or mathematical errors; permit the repayment of advances; and to provide for a method for making these deductions.
Needs and Benefits: New Part 195 will improve regulatory conditions in the state by providing clarification of the requirements for making deductions from wages. The new Part 195 will provide benefits to the regulated community as it will ensure the protection of workers and provide guidance to employers who wish to make deductions from wages. This regulation will inform and serve the public and regulated community, and supplement the Department's ability to monitor and enforce certain deductions.
Costs: The Department estimates the cost to comply with this rule is minimal. There would be a minimal cost to employers to develop and store authorizations, notices and other paperwork that would be required if an employer chooses to make deductions from wages for the benefit of the employee. There would be a minimal cost to employers to provide notices and to develop and execute a procedure for an employee to contest or delay a deduction for an overpayment made to the employee due to mathematical or clerical error or an advance made to the employee, if an employer chooses to deduct an overpayment or advance from wages. The Department estimates that there will be no increased costs to the State to administer the rule.
Local Government Mandate: Labor Law § 193 does not apply to governments or municipalities.
Paperwork: The statute requires that an employer provide notice of the terms and conditions of the deduction and that an employee sign an authorization prior to an employer making a deduction from wages for the benefit of an employee. The statute also requires that an employer provide notice of the procedure for disputing a deduction for an overpayment made to an employee due to clerical or mathematical error or an advance or delaying a deduction for an overpayment or advance and to execute this procedure when necessary. The regulations provide guidance regarding these statutory requirements.
Duplication: This rule does not duplicate, overlap or conflict with any other State or federal requirements.
Alternatives: It has been concluded that regulations relating to the types of deductions that may be made, the method by which an employee should be provided with notice, the nature of employee authorization, and the type of procedures by which an employee may contest certain wage deductions are appropriate to provide employers with guidance and to assist in the equal application of the law.
Federal Standards: Federal regulations regarding wage deductions provide that no deduction shall be made that would reduce an employee’s wage to a wage below the minimum wage.
Compliance Schedule: The regulated community will be required to comply with this regulation when it becomes effective. This regulation shall become effective upon publication of its adoption in the State Register.
Revised Regulatory Flexibility Analysis
Effect of Rule: This rule explains the types of deductions that are authorized to be made from wages and the method by which those deductions may be made. The rule applies to all employers, and clarifies the expanded circumstances in which deductions can be made. The rule will not affect small businesses unless they choose to make deductions from an employee’s wages and will not affect local governments at all.
Compliance Requirements: Employers that choose to make deductions from wages for the benefit of the employee pursuant to Labor Law § 193(b) would be required to obtain employee written authorizations and provide notice of the deductions. Those employers that choose to make deductions pursuant to Labor Law § 193(c) and (d) for overpayments due to clerical and mathematical errors made to an employee would be required to provide written notice of deductions and notice of procedures for an employee to contest these deductions made for overpayments in addition to providing a procedure for an employee to contest the deductions themselves, and/or the terms of repayment. Employers and employees must enter into an agreement for advances deducted from wages and employers must provide a procedure to contest such deductions. Employers who make deductions from wages for the benefit of the employee must maintain records of those deductions for a period of six years, regardless of whether the employer/employee relationship continues, similar to all other payroll record retention requirements.
Professional Services: No professional services would be required to effectuate the purposes of this rule.
Compliance Costs: While there may be costs associated with the compliance of this rule, if an employer chooses to make deductions from wages pursuant to Labor Law § 193(b), (c) and (d) and this rule, these costs should be minimal.
Economic and Technological Feasibility: The regulation does not require any use of technology to comply. Although there may be minimal additional costs associated with the new rule, if an employer chooses to make deductions from wages pursuant to Labor Law § 193(b), (c) and (d) and this rule, compliance is economically feasible. § 193 and these regulations do not apply to municipalities or governments.
Minimizing Adverse Impact: If a small business chooses to make deductions from wages for the benefit of an employee, for overpayments due to mathematical and clerical errors or for advances, the paperwork and requirements regarding authorization, notice and procedures for an employee to contest deductions are minimal. Therefore, the Department does not anticipate that the regulations will adversely impact small employers who comply with this Part. Different requirements for small businesses are not necessary.
Small Business and Local Government Participation: The Department has ensured that small businesses and local governments will have an opportunity to participate in the rule-making process. The Department has also participated in discussions with representatives of affected entities. The Department will elicit input from small businesses during the public comment period.
Revised Rural Area Flexibility Analysis
1. Types and estimated numbers of rural areas: The requirements contained in the proposed new rule apply to any employer who chooses to make a deduction from wages for (1) the benefit of an employee, (2) overpayments made to an employee due to a mathematical or clerical error, or (3) advances made to an employee. These employers may include those located in the 44 rural counties with less than 200,000 inhabitants and the 71 towns in urban counties with a population density of 150 per square mile or less.
2. Reporting, recordkeeping and other compliance requirements: Employers that choose to make deductions from wages for the benefit of the employee pursuant to Labor Law § 193(b) would be required “to obtain written employee authorizations” and provide employees with notices of the deductions. Those employers that choose to make deductions pursuant to Labor Law § 193(c) and (d) for overpayments due to clerical and mathematical errors or advances made to an employee would be required to provide written notice of deductions and procedures for an employee to contest these deductions, and must also utilize a procedure if an employee chooses to contest these deductions. Employers who make deductions from wages for the benefit of the employee must maintain records during the time the employee from whom the deduction was taken is employed by the employer and for six years after that employee’s employment with the employer ends, as they do for other payroll records.
3. Professional services: No professional services will be required to comply with this rule.
4. Costs: The Department estimates the cost to comply with this rule is minimal. There could be a minimal cost to employers to develop and store authorizations, notices and other paperwork required if an employer chooses to make deductions from wages for the benefit of the employee. There would be a minimal cost to employers to provide notice and to develop and execute a procedure for an employee to contest or delay a deduction for an overpayment made to the employee due to mathematical or clerical error or an advance made to the employee, if an employer chooses to make a deduction to recoup an overpayment or advance from wages.
5. Minimizing adverse impact: The requirements of this rule are not mandatory, and if an employer chooses to make deductions from wages for the benefit of an employee, for overpayments due to mathematical and clerical errors or for advances, the paperwork and requirements regarding notice to the employee and procedures for an employee to contest deductions are minimal. Therefore, the Department does not anticipate that the regulations will adversely impact employers who comply with this Part. Different requirements for rural areas were not necessary.
6. Rural area participation: The Department has ensured that employers from rural areas have had an opportunity to participate in the rule-making process. The Department will elicit input from employers and employees in rural areas during the public comment period.
Revised Job Impact Statement
The Department of Labor projects there will be no adverse impact on jobs or employment opportunities in the State of New York as a result of this proposed rule change. The rule provides guidance for deductions from wages as authorized in Labor Law 193. The nature and purpose of the rule is such that it will not have a substantial adverse impact on jobs or employment opportunities and therefore no Job Impact Analysis is required.
Initial Review of Rule
As a rule that requires a RFA, RAFA or JIS, this rule will be initially reviewed in the calendar year 2016, which is no later than the 3rd year after the year in which this rule is being adopted.
Assessment of Public Comment
1. The regulations should define “goods and services” as stated in 4.3(c) so employers know which items are covered.
Such a definition would be misleading to employers who thought that the item itself was permissible. Goods and services are permissible as long as they fall under one of the specifically listed categories in the statute, or are very similar to a listed category and are for the benefit of the employee. It is not the nature of the item which makes it permissible, but rather whether the item is similar to an enumerated category and a benefit to the employee whose wages are being deducted.
2. The regulations should allow employers to charge employees for the reasonable replacement value of items provided by the employer which had been lost, stolen or destroyed while in the employee’s possession.
Neither the statute nor the regulations allow this to take place through deductions.
3. The regulations should include other types of similar payments.
The statute already allows for a deduction made in accordance with any other law, rule or regulation.
4. There should be no list of prohibited deductions in the regulation. The list of prohibited deductions should be done through Department guidance documents instead.
The list of prohibited deductions provides a clear rule to employers and employees and contains some of the most frequent violations.
5. The regulations should not contain a list of similar deductions and should not have reorganized the statutory list of permissible deductions into groups of similar deductions. Doing so made it confusing as to whether the aggregate limits required for certain statutory categories applies to any particular deduction.
The organization into similar groups makes it easier to understand what types of deductions will be similar to those listed in the statute. The statute explicitly lists types of deductions are subject to the aggregate limit.
6. Written authorizations are too burdensome when multiple deductions are being made or amounts fluctuate, such as with insurance premiums or cafeteria purchases.
Nothing in these regulations requires a separate form for each deduction. Employers may use one form containing all the deductions (and other required information) and may include a range or cap amount for deductions which may vary from pay period to pay period. This clarification has been made.
7. Employers should be required to get separate written authorizations for each deduction made, rather than using a single authorization containing all deductions.
The information provided in the authorization and the voluntary execution of the authorization make the deduction compliant with the regulations.
8. The employer should not have to provide the employee with the option of having another person selected by the employee review the deductions material prior to authorization.
There is no requirement that the employer must provide such representation, pay for the representation, or provide multiple copies to an authorized representative. It requires that the employee be allowed to show the material to an authorized representative for review prior to signing the authorization form. If the employee is prevented from doing so, the authorization is not valid.
9. The employer should have to pay for an outside representative should the employee opt to have such representative review material regarding deductions and benefits.
The regulation strikes a balance between an employee’s need to have all the information necessary to make a decision, and an employer’s efficient operation of a business.
10. The regulations do not require the employer to pay for an authorized representative to review deduction and benefit material prior to authorization. This may conflict with some collective bargaining agreements (CBA) which require the employer to pay for the representative review.
The regulation does not prevent an employer from paying for such representation, nor does it prevent the provision of such in a CBA.
11. Section 5.1(a) is confusing as it limits the look back period to 8 weeks, but allows the repayment to take place over 6 years.
While there are two different time frames for the look back period and the repayment period, these time periods are clear.
12. Section 5.1(a) should have a longer look back period.
The 8 week period represents a reasonable amount of time for employers to catch possible payroll errors.
13. The time frames in the contest period should be longer, and the employer should not be permitted to recoup the entire overpayment from the next payment of wages.
The time frames provide both a fair process to employers and employees, and a swift resolution to the issues raised. The total reclamation from the very next wage payment is a reasonable resolution for the common problem of the accidental double issuance of a paycheck.
14. It should be clarified as to whether the limitations in Section 5.1 apply to a limit per wage payment or a limit per overpayment in the case of multiple overpayments being recouped at the same time.
The limitations apply per wage payment. Employers recouping multiple overpayments are limited to the total they may deduct from any wage payment.
15. Section 5.1(g) is confusing in that it requires an employer to repay improperly made deductions despite the automatic postponement of the deduction until after the final determination made in accordance with 5.1(g).
In the case of full recovery of the overpayment from the next wage payment, the employee must respond within two days of receipt of the notice to postpone the deduction. However, an employee who responds after the two days contained in Section 5.1(g) but before the one week contained in paragraph (f)(1) still has a right to contest the deduction while not preventing the deduction from taking place. Section 5.1(g) requires repayment of any deduction made in these circumstances should the deduction ultimately be found improper or inaccurate.
16. There should not be a presumption that the deduction is impermissible if the employer fails to comply with the dispute resolution time frames contained in the regulation.
The Department disagrees.
17. The employee should be provided material regarding the overpayment similar to the material the employer is required to provide in the case of a substantial change in benefits.
The regulation requires the employer to provide the employee with written notice containing the relevant information.
18. An employer could circumvent the notice requirement by sending the notice to an email account not regularly checked by the employee.
Notice must actually be received to be effective.
19. In making a final determination pursuant to paragraph 5.1(f)(4), the employer should have to consider whether an overpayment existed in the first place, not just a determination on the amount and time periods for recovery.
Section 5.1(f)(4) already requires the employer to make a final determination regarding the existence of an overpayment, and further requires the employer to consider whether the alleged overpayment appeared to the employee to be a new agreed upon rate of pay.
20. The last paragraph in the overpayments section should specify that employees may seek redress with the Department, as it does in the advance section.
This clarification has been made.
21. There is language missing in 5.1(f)(4).
Section 5.1(f)(4) is missing an “and” and should be corrected to read, in relevant part, “When making a final determination regarding the amount of the deduction to be made per pay period ‘and’ the date such deductions shall commence, the employer shall …”
22. Commenters asked whether the regulations governed the advance of personal time off, such as sick days and vacation days.
These regulations apply to any circumstance where the employer is providing money to an employee for work not yet performed by the employee, and recouping that money through a deduction. A deduction from future earned paid time off is to be treated the same as a deduction from future wages.
23. Employers should be allowed to make deductions for repayment of advances more frequently than once per wage payment.
The Department disagrees.
24. Employers should be able to provide and reclaim more than one advance at a time.
The one advance at a time requirement eliminates the possibility of the advance section being used as a substitute for a company store, where the employee gets further and further into debt without ever justifying the account.
25. Section 3.1(c) states that an employee may revoke their authorization to make a deduction at any time, while Section 5.2(e) of the regulation only allows authorization to be revoked prior to the provision of the advance by the employer.
Section 3.1(c) also states that the deduction is to be cancelled as soon as practicable. It is not practicable for an employer to provide an advance under a written agreement, only to have the employee unilaterally revoke the authorization to recoup the advance immediately after the advance is given.
26. Section 5.2(b) states that an employer may recover advances no less than each wage payment. It should be revised to read “no more” than each wage payment.
This correction has been made.
27. Section 5.2(c) uses the term “overpayments” rather than advances.
This correction has been made.
28. Section 5.1(f) allows dispute procedures for overpayments in CBAs to be used rather than the procedure in the regulation. This language should also be contained in Section 5.2.
This correction has been made.
29. Employers need guidance as to when an employee has been deemed to be paid for purposes of the time tables contained in the regulation.
An employee is paid when the employee has access to their wages.
30. The regulation should contain guidance regarding when a separate transaction is permissible in place of a deduction.
The regulations state when a separate transaction is permissible to reclaim overpayments or advances. Labor Law § 193 generally prohibits separate transactions which are not otherwise permissible as a deduction.
31. Commenters sought clarification regarding the impact of the proposed rulemaking on the scope of authorized deductions permitted or required under a CBA to unions and to union sponsored funds.
Neither the statute nor the regulation prohibit deductions for collectively bargained deductions for payments to unions and union funds.
32. Comments should be accepted through to July 8, 2013, as the published deadline fell on a Saturday.
The Department agrees.
33. The regulations provide much needed ability for farm employers and employees to engage in an employment relationship under reasonable terms.
The Department agrees.
34. The regulations should clarify whether the 10% rule in the prior regulation will remain.
The regulation expressly repeals the prior version. There is no similar 10% rule in the regulation. The statute does require aggregate limits agreed upon in advance for certain types of deductions.
35. Commenters identified concerns as to whether employers who pay a draw and factor that draw into the calculation of additional commissions at a later date are required to treat the draw as an advance pursuant to these regulations.
The payment of a draw is not an advance to be recouped through deductions.
36. The regulations should specify if, in the calculation of days, it means business days instead of calendar days. Similarly, it should be clarified that a week means 7 calendar days.
This clarification has been made.
37. The regulations regarding an employee’s ability to seek a delay of payments are unclear.
The statute requires the Department to issue regulations containing numerous factors to consider in the reclamation of overpayments and advances. The proposed regulations address the issues required by the statute.
38. Section 3.1(a) “misstates” the statute by using the phrase “laws, rules or regulations that are issued by any governmental agency,” rather than “any law or any rule or regulation issued by any governmental agency” used in the statute.
The rephrasing used in the regulation does not change the meaning.
Other submitters posed questions regarding the statute, requested advice on how to handle certain situations not covered by these regulations, and made suggestions regarding the provision of guidance documents. Such submissions were reviewed but not referenced in the assessment of comments regarding these regulations.
