Many employers in New York State either pay, or reimburse
their workers for, certain expenses incurred outside the scope of the
workers' employment. For example, a mid-sized or large company
may pay, on behalf of a new employee who is a foreign national, the fees
incurred in applying for a work authorization visa.
So, too, a mid-sized or large business may reimburse
a new employee who resides in a distant state for the expense of
relocating to the employer's state. Again, a large company may
reimburse a promising employee for the tuition he incurs in attending
graduate school at night.
If a company in New York pays, or
reimburses its worker for, certain expenses incurred outside the scope of
the worker's employment, and if the employee then leaves his or her
employment with that company within a specified period of time,
can the company lawfully require the employee to pay back
the company for these expenses? The short answer to this
question is "yes," but only where there is either:
1. An express agreement between the company
and the employee under which the employee agrees to remain employed by the
company for a specified period of time in return for the company's payment
of certain of his expenses; or
2. An express agreement between the company and the
employee under which the employee agrees that, if he leaves the company within
a specified period of time, he will repay the company for its
reimbursement of certain of his expenses.
Under New York's Statute of Frauds, if the period of time
for which the employee agrees to remain employed by the company is one
year or more, then the agreement must be in writing. See N.Y. Gen.
Oblig. § 5-701(a)(1) (rendering void any agreement, not in writing and
subscribed by the party to be charged with it, which "[b]y its terms
is not to be performed within one year from the making thereof"). As
a practical matter, even if the period for which the employee agrees to work
for the company is less than one year, the company should place the agreement in writing to
preclude the employee from later disputing that the parties have an
agreement or what the agreement's terms are.
What the employer may not do, even if the
employee leaves (or gives notice that he or she will be leaving) within
the specified period of time, is to deduct, from the wages of the employee, the expenses
which the employer paid. Such a deduction from the employee's wages
is prohibited even if the employee expressly authorizes that deduction in
This is the case because a deduction, from the wages of the employee, of expenses which the
employer paid is not "for the benefit of the employee." See N.Y.
Labor Law § 193 (prohibiting an employer from make any deduction from the wages
of an employee, except for certain enumerated deductions which are expressly
authorized in writing by the employee and "are for the benefit of the
If your company needs assistance or guidance on a labor or employment law issue and your company is located
in the New York City area, call Attorney David S. Rich at (212) 209-3972.
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