Those of us who represent management on labor and employment law matters view the new Wage Theft Prevention Act as saddling employers with another layer of administrative responsibilities that ultimately will add to the cost of doing business in New York. The act amends state labor law and takes effect April 9.
While the act enhances protections afforded to employees with respect to overtime violations, minimum wage issues and employee classifications, it also places several new and, in some cases, questionable requirements on employers to ensure those protections. It also will likely open the door to yet more wage-and-hour class actions, which have been on the rise in recent years and have cost even well-intentioned, compliant American businesses millions of dollars in attorneys’ fees.
The act will certainly have employers revisiting their employment policies, procedures and forms for necessary revisions to bring their businesses into compliance.
Specifically, the law creates new notice requirements, increases penalties for violations, greatly expands the scope of retaliation claims, and gives the state labor commissioner greater authority to enforce New York’s wage-and-hour laws.
Currently, New York labor law mandates that all employers provide individuals hired on or after Oct. 26, 2009-at the time of hire-with written notice of their rate of pay and the employer’s regular payday, and obtain written acknowledgement from each employee of receipt of this information. The new law significantly expands upon the type of information employers are required to include in the written notice and mandates that the notice be provided to each employee annually.
The new notices to employees must be provided on or before Feb. 1 of each year of employment. The notice must be in English and in the language identified by the employee as his or her "primary language." Employers must obtain a signed written acknowledgement of receipt of the notice each time it is received by an employee and must maintain acknowledgments for six years.
There also are new payroll and pay stub requirements, including maintaining payroll records for six years, as opposed to three years. Employers must provide non-exempt employees with information regarding the regular hourly rate or rates of pay, the overtime rates, the number of regular hours worked, and the number of overtime hours worked. Employees paid a piece rate must receive a statement including the applicable piece rates of pay and the number of pieces completed at each applicable rate.
Failure to comply with the new notice requirements may be subject to damages of $50 per work week, up to a maximum of $2,500, with costs and attorneys’ fees. Failure to comply with the act’s pay statement requirements may result in a penalty of $100 per week, up to a maximum of $2,500, plus costs and attorneys’ fees.
Other sanctions also have increased. Employers who fail to pay minimum wage and overtime compensation may now be subject to criminal penalties, which currently are applicable to the non-payment of wages and recordkeeping violations. Criminal sanctions will apply to the officers and agents of partnerships and limited liability companies, whereas previously those sanctions applied only to corporations and their officers and agents.
Violators could be found guilty of a misdemeanor for the first offense and fined $500 to $20,000 or be imprisoned for a maximum of one year. A second offense within six years of the conviction date of the first offense would be a felony with a similar range of fines and prison term.
Where an employer defaults in paying a judgment by more than 90 days after the judgment is final, the judgment will be increased by 15 percent. The act increases the amount of liquidated damages that an employee may recover in an action for unpaid wages from 25 percent to 100 percent of the total amount of wages due and gives the commissioner the right to inspect business records to find company assets.
With respect to the revised anti-retaliation provisions, employers now may be subject to liquidated damages of up to $10,000 for each incident of retaliation. Finally, the act broadens the enforcement powers of the labor commissioner, who will have the authority to investigate wage- and-hour violations, institute a proceeding based on an employer’s violation of the labor law, require an employer to provide an accounting of all assets upon a default of an order to pay wages, and post notices of employer violations at the employer’s worksite for up to one year.
While the increased administrative costs and higher penalties are alarming, perhaps the most frustrating aspect of the law is that employers will be subject to penalties if they fail to track all hours of all employees, including not only non-exempt but exempt employees. As written, the statute requires that employers must track and keep records on the hours worked even by their highest-level employees such as a chief executive officer. Candidly, it is difficult to discern what purpose this provision could possibly serve.
According to its sponsoring memorandum, the Wage Theft Prevention Act was enacted because employers did not have enough of a deterrent in the current law to pay wages properly. This is an odd conclusion, given the explosion of wage-and-hour class-action litigation throughout New York and nationwide over the last five to 10 years, which has cost businesses hundreds of millions of dollars in fines, penalties and, most significantly, attorneys’ fees.
An unfortunate consequence of this law is that it will add to the heavy burden of well-meaning employers while creating yet another opportunity for expensive class-action litigation, which predominantly benefits attorneys.
Daniel J. Moore leads the labor and employment law practice group of Harris Beach PLLC.
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