On December 14, 2010, New York Governor David Patterson signed the Wage Theft Prevention Act (“WTPA”), a new law that significantly changes the wage and hour landscape for all New York employers. This amendment to the New York Labor Law targets those employers who engage in “wage theft” by underpaying employees. In application, however, the WTPA will affect all New York employers by imposing burdensome notification and recordkeeping requirements, expanding the scope of penalties for violations, and increasing opportunities for employment litigation through strengthened anti-retaliation provisions. In compliance with these new amendments, New York employers will need to amend their payroll practices on or before April 12, 2011. Our summary and analysis of the key amendments is set forth below.
Under the WTPA, New York employers must now provide all employees with written notifications that contain the following information:
- The employee’s rate of pay, the basis thereof (e.g., hourly, weekly, salary, commission, etc.), the regular pay date, and allowances claimed against the minimum wage (e.g., tip, meal, or lodging allowances);
- The employer’s name (including any “doing business as” names), telephone number, and the physical address of the employer’s main office or principal place of business;
- Nonexempt employees must also be given notice of their regular rate of pay as well as their overtime rate of pay.
Employers must provide this information at the time of hire as well as on or before February 1 in each year thereafter. The above disclosures must be in English as well as the employee’s self-identified primary language. Moreover, employers are required by the WTPA to obtain signed acknowledgments from employees, verifying that the notifications were made. Employers who fail to comply may face legal actions and be subject to monetary damages, injunctive relief, as well as paying reasonable attorneys’ fees and costs.
Pay Statement Obligations
Under the WTPA, New York employers must now provide written statements along with each payment of wages. The statements must include the dates of work covered, the employer’s name, address, phone number, rates of pay and basis thereof (e.g., hour, shift, day, week, salary, piece, commission, etc.), gross wages, deductions, net wages, and allowances claimed against the minimum wage (e.g., tip, meal, or lodging allowances). For nonexempt employees, the statement must also include the regular hourly rates of pay, overtime rates of pay, and the number of regular and overtime hours worked. In addition, upon the request of an employee, the employer must now furnish an explanation in writing as to how specific wages were computed. These compliance obligations extend beyond the recordkeeping requirements imposed on employers under federal law. New York employers who fail to comply with these new obligations may face legal actions and may be subject to monetary damages, injunctive relief, as well as paying reasonable attorneys’ fees and costs.
Under the WTPA, employers are now required to keep wage-related records for 6 years. For each week, employers must maintain contemporaneous, true, and accurate payroll records showing hours worked, rates of pay and basis thereof (e.g., hourly, salary, shift, day, piece, commission, etc.), gross wages, deductions, net wages, and allowances claimed against the minimum wage (e.g., tip, meal, lodging allowances) for each employee. The records for nonexempt employees must also indicate regular hourly rate of pay and overtime rate of pay as well as the total number of regular and overtime hours worked.
The WTPA increases the scope of available remedies for wage and hour violations.
- Liquidated Damages: Unless they can prove a good faith basis for believing they were in compliance, New York employers who fail to pay wages (e.g., minimum wages, overtime wages) are liable for the total amount of unpaid wages, costs, attorneys’ fees and liquidated damages. Liquidated damages presently are calculated to equal 25% of the total amount of wages due. The WTPA quadruples the amount to equal 100% of the wages due. On its face, this increase appears to mirror the liquidated damages available under the federal Fair Labor Standards Act (“FLSA”). However, employers should be mindful that the statute of limitations for violations of the New York Labor Law is 6 years (currently the longest of any state wage law), whereas the FLSA statute of limitations is at most three years. Additionally, employers must be mindful that at least some courts have found that liquidated damages under the FLSA and the New York Labor Law do not offset one another and may be recovered simultaneously.
- Workplace Postings: The WTPA empowers the Commissioner of Labor to post a notice (for up to 1 year) in an area visible to employees and which summarizes the employer’s violation. If the violation is willful, the Commissioner may post the notice (for up to 90 days) in an area that is visible to the public.
- Criminal Penalties: Under the New York Labor Law, employers that fail to pay the minimum wage or overtime compensation may be found guilty of a misdemeanor, and therefore fined up to $20,000 dollars or imprisoned for up to one year. If a second violation and conviction occurs within 6 years, the employer will be guilty of a felony. The WTPA expands these criminal penalties to partnerships and limited liability companies.
- Attorneys’ Fees: The WTPA eliminates the potential for judicial discretion by directing the courts to award “all” reasonable attorneys’ fees as well a prejudgment interest in cases involving the underpayment of wages.
The WTPA grants anti-retaliation protection to employees who “reasonably and in good faith believe” that a violation of the Labor Law or Order of the Commissioner has occurred. Accordingly, we foresee this vague standard leading to an uptick in employees alleging retaliation claims. If successful, these employees will entitled to injunctive relief, liquidated damages of up to $10,000, back pay, and reinstatement. The WTPA also provides for an award of front pay in lieu of reinstatement. Unlawful retaliation is now deemed a class B misdemeanor.
In sum, the WTPA changes the way New York employers, large and small, will need to conduct business and keep records. The myriad of wage and hour laws was already complicated and is becoming more so. The cost to employers of non-compliance — regardless of whether from ignorance, misunderstanding, or willfulness — is getting even costlier. Accordingly, now is a good time for employers to communicate with experienced wage and hour counsel regarding compliance strategies.
Peter J. Dugan is an Associate in the Gibbons Employment Law Department.