Employers often have employees approach them and request an advance of their unearned salary or use of paid vacation time before it accrues.  Employers often deduct the money owed to them from the employee’s paycheck if the employee leaves his/her employment, but is it legal?

Under New York Labor Law §193, Employers are only allowed to make certain authorized deductions from an employee’s paycheck as authorized by the law such as FICA, Social Security, etc.  There are also specifically enumerated deductions that Employees are authorized to deduct if the deduction is for the employee’s benefit and authorized in writing as follows:  “insurance  premiums,  pension  or health and welfare benefits, contributions to  charitable  organizations,  payments  for  United  States  bonds,  payments for dues or assessments to a labor  organization, and similar payments for the benefit of the employee.”

Until recently, the New York State Department of Labor (NYSDOL) did not seem to object to Employers deducting advancements from an employee’s final paycheck because it was a “similar payment(s) [to those authorized by the law] for the employee’s benefit,” as long as the employee signed an agreement authorizing the deduction. Then if an employee was terminated from his employment, Employers would deduct these advances from the employee’s final paycheck.

The NYSDOL has now changed its position, and Employers can no longer deduct advanced salaries or loans from an employee’s paycheck under any circumstances.  In addition, if an Employer overpays an employee’s salary, he cannot deduct that overpayment from the employee’s next paycheck.  The NYSDOL has relied primarily on a Court of Appeals case and articulated its new view point in two opinion letters.  The New York State Court of Appeals in Angello v. Labor Ready (2006), discussed the issue of an employer deducting monies for a salary processing fee from an employee’s wages.  Specifically, the Court of Appeals in Labor Ready explained that payments that go “directly to the employer or its subsidiary violates both the letter of the statute and the protective policy underlying it,” and wages should not be deducted.

In two opinion letters from the NYSDOL in August 2009 and January 2010, the NYSDOL changed its interpretation of NYS Labor Law §193, and instead relies on the holding in Labor Ready.  In the August 3, 2009 Opinion Letter (RO-09-006), an employer requested an opinion whether it was permissible for an employer to make a deduction from an employee’s final paycheck to recover unearned salary and/or benefit which have been advanced to the employee.  Relying on Labor Ready¸ the NYSDOL determined that these types of deductions are no longer permissible since the over-payments are neither authorized by law nor are they “similar payments,” especially since the money is going back to the employer.

The January 10, 2010 letter reiterated its opinions from the August 2009 letter, but explained how an Employer can get repaid if they advance monies to employees.  The NYSDOL’s answer is that the Employer could always sue the employee, while that employee continues to work at the business, or the Employer could request the employee repay the monies in a separate check.  If the Employer desires to have the employee write a separate check to repay the monies,   the Employer must clearly communicate to the employee that they cannot be disciplined or retaliated against if they refuse to pay back the money.  The reasoning behind this is that under Labor Law §193(2) Employers are prohibited from requiring an employee to make any payment by separate transaction.  The purpose of this law is to assure that “unequal bargaining power between an employer and an employee does not result in coercive economic arrangements by which the Employer can divert a worker’s wages for the Employer’s benefit.” Labor Ready at 586.

With these recent opinion letters, Employers should no longer advance monies to employees or allow them to take unaccrued paid vacation time, unless the Employer is willing to take the risk of not being paid back for these advancements.

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Employers are free to hire people who best meet their needs and may select from the qualified candidates generally without restriction. However, hiring may not be done utilizing criteria which the law has deemed to be improper.

One matter which is surprising to most employers is that they cannot discriminate in hiring based on the applicant’s prior arrest record or even conviction (Human Rights Law §296 and New York Corrections Law Article 23-A).

However, if there is a careful analysis of the specific duties and responsibilities necessary to the employment sought and if it can be demonstrated that the criminal offense for which the person was arrested and convicted is directly related to such duties and responsibilities, then the employer may decline to hire the person. There are other factors to be weighed as well, including the age of the person at the time of the offense, subsequent history of good conduct and rehabilitation, etc.

More employers are now obtaining background checks on their employees or potential employees and that is often how criminal arrests or convictions come to an employer’s knowledge. If an employer orders an investigative consumer report as part of a background check, which can only be obtained with the consent of the applicant, then, as of February 1, 2009, the potential employer must provide a copy of Article 23-A of the Corrections Law to the proposed applicant so they will know their rights not to be discriminated against on the basis of prior arrests and convictions. That new law also requires the posting of a copy of Article 23-A of the Corrections Law in a conspicuous place at the worksite in the event investigative consumer reports are obtained in connection with either retaining or hiring employees.

The law, however, now recognizes that in this litigation prone society, employers must have some protection if they hire previously convicted persons and later such convicted persons engage in wrongful actions. When third parties are adversely affected by such wrongful actions and sue the employer claiming that there had been a negligent hiring or retention of that employee, previously there were no statutory protections for the employer even though it was merely trying to comply with the non-discrimination provisions of the law.

Section 296 of the Human Rights Law has just been amended (and is presently effective), to provide that if an employer hires a person who has been convicted and there has been an evaluation of different factors discussed above under Corrections Law Article 23-A and the employer makes a reasonable good faith determination that such factors militate in favor of hiring or retention of the employee, they are protected from such suits based on negligent hiring or retention. This protection is in the form of a rebutable presumption against permitting the introduction of the criminal conviction of a hired employee into evidence at such a trial. While such newly enacted protection is not an immunity,it will make bringing such a lawsuit against an employer much more difficult and therefore affords some breathing room for an employer who wishes to hire someone previously convicted of a crime. Being cautious may help in avoiding unnecessary litigation. business litigation.

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Federal and New York State Law prohibits employment discrimination on the basis of sex.

Federal Title VII of the Civil Rights Act only applies to employers with 15 or more employees, and the New York State Human Rights Law discrimination section applies to employers with four or more employees.

Sexual Harassment is defined as the unwelcome overtures of a sexual nature which alter the terms and conditions of employment offered to women (or in some cases to men) in a way in which the terms and conditions of other employees are not effected. There are two types of sexual harassment: Quid Pro Quo sexual harassment and hostile work environment.

Quid Pro Quo sexual harassment involves the actual demand for sexual favors as a term or condition of employment, and is only applicable in the supervisor/ employee scenario. A hostile work environment claim arises when sexually charged unwanted conduct and verbalizations occur in the workplace. The type of conduct must be severe or pervasive. Employees who are successful in bringing a claim for sexual harassment can receive a wide range of remedies including reinstatement, back pay, front pay, compensatory damages, and punitive damages.

Claims of sexual harassment can be very costly to an employer. So what can employers do to protect themselves from these sorts of claims? The Supreme Court has handed down two decisions which give some directions to employers: Burlington Industries v. Ellerth, 524 U.S. 742 (1988) and Faragher v. Boca Raton, 524 U.S. 775 (1998). In those cases, the Court found that if the employer has a handbook which has an anti-harassment policy and has a reasonable and effective method for the employee to complain and seek redress for inappropriate conduct then if the employee fails to utilize such a known and effective policy and procedure, the employer will prevail because it never got a chance to solve the problem before the situation got so bad as to be declared a matter worthy of federal litigation.

The question remains what is an effective sexual harassment policy. All employers should have the following:

1. Employee handbooks stating that the Company will not tolerate sexual harassment;
2. Complaint procedures setting forth how to report harassment;
3. Investigative procedures in place for supervisors to follow upon receiving a complaint;
4. Training.

A recent New Jersey Appellate Division case, Cerdiera v. Martindale-Hubbell, 402 N.J. Super. 486 (App. Div. Sept. 2008) held that an employer could be liable where the employer has failed to have in place effective and wellpublicized sexual harassment policies that provide employees with reasonable avenues for voicing sexual harassment complaints. Although there is not yet a case in New York, New Jersey has been a bellwether state in indicating how other states’ case law will change in the employment realm.

Beginning in 2009, our firm will offer Harassment Training for Managers/Supervisors in order to assist our business clients to create and maintain an effective anti-harassment policy. Contact us to set up such training for your employees.

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            On February 4, 2009, the President signed the Children’s Health Insurance Program Reauthorization Act of 2009 (“CHIPRA”).  CHIPRA extends and expands the State Children’s Health Insurance Program (“CHIP”).  CHIP is a federal-state program designed to reduce the number of low income children without health coverage.  This new law permits states to subsidize premiums for employer sponsored group health coverage for eligible children and families. 

            CHIPRA requires most Employers in New York to provide notice to their employees of potential opportunities currently available in New York for group health plan premium assistance under Medicaid and the Children’s Health Insurance Program (CHIP).

            Any New York Employer who provides benefits (directly or through insurance, reimbursement, or otherwise) for medical care for its employees, and contributes at least 40% towards their health insurance premiums, must provide the CHIPRA Notice.

            The notices must inform each employee of the possible state premium subsidy assistance program regardless of the employee’s current enrollment status.  Employers are required to provide notice of this opportunity by the first day of the plan year after Feb. 4, 2010 or May 1, 2010 (whichever is later).  For example, if an Employer’s plan year begins on January 1^st of each year, the notice would need to be provided by January 1, 2011.  Each year, another copy of the notice must be provided to the employee.  The model notices can be accessed at http://www.dol.gov/ebsa/.

            There are civil penalties up to $100 a day for failure to comply with the new notice and disclosure requirements.

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