Part Five in a Five Part Series originally posted in the Rockland County Business Journal on February 4, 2020
Did you know New York law does not permit employers to deduct from an employee’s paycheck for items such as cash shortages, inventory shortages, loss of property, damage to property, or to pay for required tools or uniforms? We find many employers don’t know about these limitations, and those who do view them as counterintuitive – I mean, they owe me, so why can’t I take it? Here’s what you need to know before you start taking money from your employee’s paychecks.
The Statute
New York Labor Law specifically prohibits employers from making any deduction from the wages of an employee, except those either:
- Authorized by law; or
- Expressly authorized in writing by the employee and the deduction is for the benefit of the employee.
Therefore, deductions may be made for things like insurance premiums, union dues, gym or health center membership dues or contributions to charitable organizations – if proper authorization is given by the employee. Employees must voluntarily and expressly authorize these deductions in writing. Employee authorization must be kept on file at the employer’s premises while the employee is employed and for six years after they leave employment. They must also be given written notice of all terms and conditions of the payment and details about how deductions will be made. If a substantial change is made in the terms or conditions of the deduction, the employer is required to alert the employee in writing as soon as practicable and before any increased deduction is taken.
The key in New York is the deduction is being taken for the “benefit of the employee.” You might be asking – what does it mean to be “a benefit” to the employee? This is the counterintuitive issue. For example, if you loan an employee money and ask him/her to repay it through payroll deduction, this is not for the benefit of the employee! Rather, since it is the repayment that is at issue, the repayment is for the employer’s benefit, not the employee’s! Crazy right?
The Take Away
Employers – the first thing to take away from this article is if you plan to give an employee a loan, you might be hard pressed to find a way to get your money back if the employee doesn’t want to pay you back. You absolutely cannot deduct this amount from their paycheck! You also cannot deduct for damaged property, lost inventory, uniforms or tools. In most instances, if the deduction isn’t for one of the items we already listed in this article, it probably is not allowed. Finally, remember – even if a deduction is permitted, for health insurance for example, you still need authorization in writing from the employee! It’s a two-step process, employers – the deduction must be authorized and the paperwork must be complete. New York doesn’t let you get around either of these steps.
