New state rules for wage deductions signed into law in September mark some positive changes for employers and workers, a local attorney says. The new rules, which went into effect Nov. 6, outline a number of new permissible categories for deductions from employee paychecks, says Jacqueline Jones, a partner at Syracuse–based Mackenzie Hughes, LLP. They […]
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New state rules for wage deductions signed into law in September mark some positive changes for employers and workers, a local attorney says.
The new rules, which went into effect Nov. 6, outline a number of new permissible categories for deductions from employee paychecks, says Jacqueline Jones, a partner at Syracuse–based Mackenzie Hughes, LLP. They cover items such as paybacks of payroll advances, parking and mass transit, gym memberships, and more.
They were deductions that employers and employees around the state had already been using, Jones notes. The law on deductions included a broad catch-all provision that seemed to allow the variations.
Over the years, though, the state Department of Labor gradually became more strict in its interpretation of that provision and began to issue opinion letters stating some common deductions were illegal, Jones says. There were also some inconsistencies over the years in what the department said was allowed under the catch-all provision.
The new rules resolve the issue by outlining a number of new categories of deductions in detail.
“It’s a welcome expansion from the perspective of most employers of the ability to take deductions out of employee paychecks,” Jones says. “Now it’s clear, which is good.”
She adds that clients in manufacturing frequently advance employees small loans and then deduct the amount from the following paycheck. Many times, it’s a worker looking for $50 or $75 to buy gas or food until the next pay period, Jones says.
The new rules specifically approve that practice, she explains. It’s a deduction that writings from the Labor Department had cast doubt on, she says.
“The loans were something we saw our clients really had a problem with,” Jones says.
Employers in a number of industries in the area also use payroll deductions to fund parking, she adds.
“That’s now permissible,” she says.
Funding mass transit passes through payroll deductions is also now approved in detail in the rules. Other deductions under the new rules could fund education and pre-paid legal plans provided through a company and purchases made at a company cafeteria, gift shop, or pharmacy, Jones says.
The Labor Department is expected to issue detailed regulations governing the new deductions in December. In the meantime, Jones says any employers wishing to use the new categories should make sure to have written authorization from employees.
The new rules mandate that workers approve any of the new deductions in writing. The law also gives them the right to revoke that approval at any time, Jones notes.
That provision could give some employers pause when it comes to the pay advances, she adds. Theoretically, workers could revoke their authorization for a deduction to pay an advance back.
It could then be more difficult for a company to recoup the loan, Jones says.
“If the numbers get bigger and the employee has the ability to revoke that, employers will have to think about far do you want to go with that,” she says.
The forthcoming regulations will provide even more detail for employers on how the deductions will work, especially regarding pay advances. Regulations are expected on the size of pay advances, timing, frequency, and duration, Jones says.
The department is also expected to issue guidance on what happens in the case of a wage overpayment and how an employee would return the excess funds, she adds.
The new rules do include a sunset provision, Jones notes. They’ll expire in three years and lawmakers will have to renew them then.
Contact Tampone at ktampone@cnybj.com
