Scope of NY payroll deductions broadens

Gov. Andrew M. Cuomo recently signed legislation that

Gov. Andrew M. Cuomo recently signed legislation that will broaden the scope of payroll deductions employers will be allowed to take from employee paychecks --including overpayment of wages due to clerical or mathematical errors and salary advances. (Credit: iStock)

Jamie Herzlich

Newsday columnist Jamie Herzlich Jamie Herzlich

Herzlich writes the Small Business column in Newsday.

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Gov. Andrew M. Cuomo recently signed legislation that will broaden the scope of payroll deductions employers will be allowed to take from employee paychecks.

Among the biggest benefits to employers of the wage deduction legislation, which amends state labor laws, is their ability to collect on overpayment of wages due to clerical or mathematical errors and salary advances they may have paid.

"Prior to the enactment of this law, the deductions permissible by New York State labor law were very limited," said Keith Gutstein, an employment lawyer and partner at Kaufman Dolowich Voluck & Gonzo Llp in Woodbury.


More: Read the original language in the law.


Previously, they were limited to such deductions as tax and Social Security withholdings, retirement contributions, insurance premiums, pension or health and welfare benefits, union dues and the like, Gutstein said.

And if an employer wanted to recover any overpayments or wage advances, they had little recourse but to pursue litigation if an employee wasn't willing to cooperate.

But that "becomes a very time-consuming and costly proposition, just to get your money back," Gutstein said.

The new law eliminates those hurdles.

Written consent, then deductions. Details about the deductions to cover repayment, such as the limits on the periodic amounts for repayment, as well as the frequency and duration of deductions, have yet to be released, Gutstein said. The New York State Department of Labor still must issue final regulations on the new law, which goes into effect early November.

But in general, any deduction would require an employee's written consent, said Carolyn Richmond, chairwoman of the labor and employment group in the New York City office of Fox Rothschild Llp.

In addition to allowing employers to collect for overpayment or salary advances, the legislation also allows them to make deductions for such services as discounted parking or mass transit expenses, fitness and gym membership dues and day-care expenses, Richmond said.

This can be helpful to an employee from a budgetary standpoint if, as a matter of convenience, they'd prefer knowing these expenses are being automatically deducted from their wages, she said. It could also be beneficial in cases where the employer may get a group discount on gym membership, for example, Richmond said.

Easier pay advances. Still, one of the biggest benefits to employees is that employers might be more willing to extend wage advances knowing they could recoup their money more easily via a payroll deduction, said Dawn Davidson Drantch, in-house counsel for Alcott HR, a Farmingdale-based professional employer organization.

"For a lot of small businesses, the employees are almost like family," Drantch said. "The employers want to take care of their employees and want to be fair, and this gives them the mechanism to do that."

This will improve employee relations, she said.

Adrienne Giannone, president of Bohemia-based Edge Electronics, a distributor of electronic components, said the legislation is a "win-win for all."

In the past, she's given loans to some employees via her private funds to avoid any payroll problems.

"Employees are usually good about repaying a loan, but occasionally I am not repaid, which results in an awkward situation for both the employee and me," Giannone said. "Being able to deduct the amount from their salary will allow the employee the ability to repay the loan at an affordable amount and not be embarrassed about not being able to repay their debt."

As employers await the final regulations, they may want to take stock of what type of benefits they offer employees that will apply to the payroll deduction, as well as reassess what additional benefits they may offer employees that might be more attractive now that the payroll deduction is available, Richmond said.

And when the regulations are issued, employers' handbooks should be updated to reflect the new policies, she said.

"This opens up a huge door for businesses," Richmond said.

For more on the legislation see: http://www.governor.ny.gov/assets/documents/GPB49-WAGE-DEDUCTION-BILL.pdf