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.