The NY DOL’s final regulations regarding an employers’ ability to reduce employee wages for overpayments recently took effect. Consistent with the DOL’s proposed regulations, which we discussed here, the final regulations permit employers to make wage deductions for overpaid wages resulting from a mathematical or other clerical error as follows:
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When an employer wants to deduct an overpayment which is less than or equal to the net wages earned in the next pay period, the employer may recover the entire overpayment in the next wage payment, but must give the employee at least three days’ notice before it makes such a deduction.
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When an employer wants to deduct an overpayment which exceeds the net wages in the next pay period, the employer may only recover up to 12.5% of gross wages earned in that wage payment, and the deduction may not reduce the effective hourly rate below minimum wage. In this situation, the employer must give the employee at least three weeks’ notice before it commences such deductions.
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Notice must be given within eight weeks of the overpayment, although the wage deductions may continue for up to six years from the original overpayment. The notice must include the total amount and the amount per pay period that the employer overpaid the employee, the total amount to be deducted and the date and amount of each deduction. The notice must also inform the employee that the overpayment may be contested, and include the deadline and procedure for challenging the employer’s determination.
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Employers must adopt procedures for employees to dispute the overpayment and the terms of recovery, and/or the timing of the recovery. For unionized employers, dispute resolution provisions in collective bargaining agreements which provide at least as much protection to the employee shall be deemed to be compliant with the law.
Employers are also permitted to make deductions for repayment of advances of wages or salary, as defined by the regulations, with similar notice and procedural requirements.
