Mark Goldstein contributed to the content of this post.

What do you do when you accidentally overpay an employee? Can you deduct the overpayment from the employee’s next paycheck? Until very recently, the answer in New York State was a resounding “no.” The scope of permissible deductions from employees’ wages was exceedingly limited. Although the Legislature expanded the scope of permissible deductions in June 2012 to include, among other things, deductions for various advances and, in certain circumstances, overpayment of wages (as more fully described here), reliance on the new law has been stymied by the State Department of Labor’s utter silence concerning the law’s implementation.

On May 22, 2013, the Department finally broke its silence, publishing the long-awaited proposed guidance and giving employers their first a glimpse into the regulations interpreting the new law. Specifically, the proposed guidance would:

  • Require explicit notice to employees of all terms and conditions of any proposed deduction, the benefit(s) derived by the employee, and, finally, the manner in which the deduction will be made by the employer;
  • Expressly enumerate those items that are excluded from the scope of permissible deductions, including employee purchases of tools and certain other equipment and contributions to political action committees; and
  • Detail the specific procedure by which an employer may take a lawful deduction for a wage advance or overpayment.

For now, the guidance is not binding. The Department of State is accepting suggestions, comments, and questions for further consideration via e-mail ( until July 6, 2013 . A final version of the regulations, which may closely resemble the proposed guidance, is expected later this summer or early in the fall. A copy of the proposed regulations can be accessed here.

 What Does This Mean For My Company?

Although the current guidance is only a proposal, employers should take advantage of the period preceding the Department of Labor’s issuance of the final regulations to:

  • review all deduction and other payroll-related policies and practices and, to the extent necessary, perform a self-audit; and
  •  work with counsel to draft and implement a new policy on deductions – addressing both the scope of such deductions and the means by which deductions will be made – that complies with the newly-amended Labor Law as well as any guidance ultimately issued by the State.