New York Labor Law §193 has prohibited employers from deducting sums from employees’ paychecks since 1966, subject to a number of enumerated exceptions. Commencing in 2010, the New York State Department of Labor began issuing several highly controversial opinion letters and web postings announcing a narrower interpretation of §193, which appears aimed at changing long-standing wage payment practices in New York. According to the recent labor department interpretations, if an employer advances money to an employee, the employer may not later recoup such payments through a wage deduction, even where the employee has authorized the deduction. Likewise, according to the labor department, if an employer inadvertently overpays an employee’s wages, the employer may not recover the overpayment by deducting funds from the employee’s paycheck, again, even where the employee has agreed to the deduction.
In both scenarios, the labor department’s most recent interpretations of §193 also prohibit employers from requiring, by threat of discipline for example, that their employees repay the employer by means of a separate transaction. In essence, under the labor department’s latest interpretations, an employer’s sole recoursewhen an employee refuses voluntarily to repay an overpayment or an advanceis to initiate the cumbersome and expensive process of commencing legal action against the employee to recoup any wage overpayment or overdue loan or advance repayment.
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