Employment Law Alert : Gibbons P.C.: Labor Relations, Employment Contracts, Employee Benefits, & Wrongful Discharge Lawyers & Attorneys

The District Court granted the employer’s motion to dismiss, but the United States Court of Appeals for the Third Circuit reversed. The Third Circuit agreed that no other potential plaintiff had yet opted into the suit, that the offer of judgment fully satisfied plaintiff’s individual claim, and that, under its precedents, such an offer generally moots a plaintiff's claim, whether or not it is accepted. Nevertheless, the Third Circuit held that plaintiff's collective action was not moot because allowing defendants to "pick off" named plaintiffs with an offer of judgment before a District Court certified a collective action “could short circuit the process, and, thereby, frustrate the goals of collective actions.” The Third Circuit remanded the case to the District Court to allow plaintiff to seek "conditional certification.

The Supreme Court’s Opinion

Writing for the majority, Justice Thomas held that the issue before the Court was simply whether the employer’s offer of judgment terminated the “actual controversy” between the parties over which a federal court could constitutionally assert jurisdiction, in that it offered plaintiff complete relief on her individual FLSA claim. To resolve that issue the Court had to determine whether the offer of judgment rendered the controversy moot even though plaintiff had never accepted it. The Court noted that the Circuit Courts of Appeals were split on the issue, but concluded it did not have to resolve the split, as plaintiff had conceded the issue in the District Court and in the Third Circuit and thus could not raise it in the Supreme Court.

The Court then rejected plaintiff’s contention that her attempt to bring a collective action gave her a personal stake in the action that survived the offer of judgment. The Court distinguished collective actions from class actions certified under Rule 23. Once a court certifies a Rule 23 class action, the class members attain a legal status before the Court separate from that of the named plaintiff, so that a live controversy continues to exist even should the named plaintiff’s individual claim become moot. In collective actions, however, the class certification procedures of Rule 23 do not apply and thus, until some other person opts into the action, there is no claim before the Court over which it can assert jurisdiction once the plaintiff’s claim becomes moot. Accordingly, the Court held that the District Court had properly dismissed the action.

In dissent, Justice Kagan took the view that plaintiff, in the courts below, had not waived the issue of whether the offer of judgment had rendered her claim moot. Reaching that issue, the dissent maintained that only an accepted offer of judgment moots the action, that a District Court has no authority under Rule 68 to enter a judgment based on the offer of judgment over the plaintiff’s objection, and thus that the District Court in the present case should have considered plaintiff’s request for a collective action in order to provide her with all of the relief requested in her complaint.

Conclusion

The Genesis Healthcare decision clearly provides employers faced with collective actions in FLSA, ADEA or EPA cases with the option of making offers of judgment that would give the named plaintiffs complete relief and thereby nip in the bud a request that the Court allow a collective action to proceed. However, the issue of whether such offers, if not accepted, will moot the plaintiff’s claim and thus bar the collective action has not been finally decided by the Court. Whether any members of the majority will side with the dissent on that issue remains to be seen, and plaintiffs’ lawyers in jurisdictions that have not ruled on the issue will certainly press the point.

For answers to any FLSA questions or questions regarding collective actions or class actions, please feel free to contact an attorney in the Gibbons Employment & Labor Law Department.

Richard S. Zackin is a Director in the Gibbons Employment & Labor Law Department.

Though the bill’s definition of “employee” excludes independent contractors and subcontractors, the bill includes a rebuttable presumption that an individual earning less than two thirds of the median hourly wage, as determined by the Department of Labor and Workforce Development, is an employee and not an independent contractor. The rebuttable presumption cannot be altered by contract nor does it alter any existing criteria for a determination of independent contractor status pursuant to State law.

Another noteworthy provision in the bill states that if an employer fails to present employee records as required by State law after an employee alleges a violation, a fact finder may infer that the employer employed the employee for the period of time and owes the amount of wages alleged in the complaint --unless the employer provides a reasonable excuse for the failure to present employee records.

The bill also imposes a disorderly persons offense on an employer who retaliates against an employee who filed a complaint under the statute and makes the employer liable to the employee for damages. The bill, approved in a 47-29 vote, now heads to the Senate.

Senate Committee Substitute for Senate Concurrent Resolution No. 1 (Minimum Wage Amendment)

Also on December 17, 2012, the Assembly passed a resolution that will ask New Jersey voters to authorize an amendment to the State Constitution that would increase the State’s minimum wage rate from $7.25 to $8.25 per hour and base future increases on the Consumer Price Index. Currently, a full-time employee working 40 hours per week and compensated at the minimum wage makes $15,080. Pursuant to the proposed amendment, that same worker will earn $17,160 per year for an increase of $2,080.

The resolution, which was passed in a 46-29-1 vote, would need to pass through both the Assembly and the Senate a second time before it could be placed on the ballot.

Employer Takeaway

As this year draws to a close, now is a good time for employers to revisit their employment record-keeping and wage-payment policies to ensure compliance with all statutory requirements.

We will continue to monitor the status of the proposed legislation and update our readers on future developments. In the interim, for answers to questions about how the proposed legislation may impact your business or  any  of your employment or labor law-related needs, please feel free to contact an attorney in the Gibbons Employment & Labor Law Department.

Lindsay J. Jarusiewicz is an Associate in the Gibbons Employment & Labor Law Department.

The FLSA obligates employers to compensate non-exempt employees for hours in excess of 40 per week at the rate of one-and-a-half times the employees’ regular wages. SmithKline did not pay the Reps time-and-a-half wages when they worked in excess of 40 hours per week because it classified them as exempt from overtime. As a result, the Reps brought suit alleging violations of the FLSA for failing to compensate them for overtime.

In a prior similar lawsuit brought in the Second Circuit Court of Appeals, the U.S. Department of Labor (“DOL”) filed an amicus brief in which it advocated against applying the outside sales exemption to the detailers – reasoning that the outside sales exemption does not apply unless a “transfer of title” to the property takes place. The DOL filed a similar amicus brief in the Supreme Court in the SmithKline case.

The Court’s Decision

The Supreme Court held that pharmaceutical sales representatives are covered by the outside salesman exemption and, in so ruling, rejected the position of both the Reps and the DOL that under the FLSA’s regulations a transfer of title is required for a “sale” within the meaning of the exemption. The Court focused on the unique relationship between pharmaceutical sales representatives and the physicians whom they solicit: 

Obtaining a nonbinding commitment from a physician to prescribe one of [SmithKline’s] drugs is the most that [the Reps] were able to do to ensure the eventual disposition of the products that [SmithKline] sells. This kind of arrangement, in the unique regulatory environment within which pharmaceutical companies must operate, comfortably falls within the [regulation’s] catch-all category of “other disposition."

In further support of its decision, the Court noted that the Reps “bear all of the external indicia of salesman.” For example, the Court emphasized that the Reps:

• were hired for their sales experience;
• were trained to close each sales call by obtaining the maximum commitment possible from the physician;
• worked away from the office with minimal supervision; and 
• were rewarded for their efforts with incentive compensation.

Finally, in considering the equity of fair warning for employers, the Court emphasized that the DOL had previously interpreted the FLSA regulations as requiring only that an employee “in some sense” make a sale, and otherwise “acquiesce[d] in the sales practices of the drug industry for over 70 years.” It would, therefore, be unfair to change the guidance given employers for many years especially when lack of notice would have significant financial repercussions.

Conclusion

The Supreme Court’s decision in SmithKline generally gives employers in the pharmaceutical industry vindication in classifying their sales representatives as exempt from overtime under the FLSA. In this case, the Court looked to job duties and responsibilities of the particular detailers and took into consideration industry practice and regulatory compliance. While there may exist analogous situations outside of the pharmaceutical industry, where the same arguments for application of the outside salesman exemption can be made, employers should conduct an analysis of their own circumstances and not rely unconditionally on SmithKline. Employers should consult with counsel to make these assessments. Attorneys in the Gibbons Employment & Labor Law Department regularly assist employers in these reviews and other employment and labor matters.

Mitchell Boyarsky is a Director in the Gibbons Employment & Labor Law Department. Michael J. Riccobono, an Associate in the Gibbons Employment & Labor Law Department, co-authored this post.

Employer Takeaways

In light of this development, employers with operations in the Third Circuit may be forced to litigate wage and hour claims under both federal and state law as part of the same lawsuit. The differing statutes of limitations, recoverable damages and burdens of proof as between the FLSA and the various state laws will certainly complicate the litigation of these claims, making them more costly for employers to litigate and more difficult to settle and subjecting employers to a wider array of damages.

Given this development, now is a good time for employers with operations in New Jersey, Pennsylvania, Delaware, and Virgin Islands to communicate with experienced wage and hour counsel regarding strategies to avoid wage and hour litigation. If you have any questions, please feel free to contact any of the attorneys in the Gibbons Employment & Labor Law Department.

Peter J. Dugan is an Associate in the Gibbons Employment & Labor Law Department.

Court’s Ruling

The Court, utilizing the “economic realities” test, considered whether any entity beyond Good Samaritan Hospital could be held liable as alleged in the complaint. This analysis requires scrutinizing the degree of formal control exercised over an employee. In the absence of formal control, the Court considered the degree of “functional control” exercised over the employee. The Court found unpersuasive plaintiff’s allegations that the Health System presented itself as a unified and integrated entity, utilized the same meal-deduction policy, had common ownership and was engaged in a joint venture. The Court also rejected arguments of agency or alter-ego relationship because the complaint merely asserted conclusory statements to support these theories.

The Court employed the same economic realities test to consider whether the CEO could be held liable. It concluded that his alleged responsibility to manage the Health System, to make decisions affecting staff benefits, Health System operations and significant functions and to create and/or implement policies failed to state a plausible claim against the CEO. In sum, the CEO did not “possess the power to control the workers in question.” The complaint did not claim the CEO had any direct involvement with the employees. Furthermore, the Court noted that the more numerous the employees the less the courts are likely to hold a senior executive individually liable.

Finally, the Court analyzed whether the lead plaintiffs properly asserted claims for denial of wages and concluded that they did not meet their burden for many of their claims. In some instances, the Court differentiated between viable claims asserted by one plaintiff and insubstantial claims asserted by other plaintiffs.

Analysis for Employers

Individual liability and corporate organization liability are often litigated. In some cases, courts have found senior executives to be potentially liable. The determination will depend on the extent of control exercised by the senior executives. Likewise, the mere identification of an entity as part of larger organization or system will not alone create liability of the larger entity for wage claims asserted against the smaller company or component. Gibbons attorneys in the Employment and Labor Department are available to assist employers with these matters.

Mitchell Boyarsky is a Director in the Gibbons Employment & Labor Law Department.

While there are some factual distinctions between the three cases discussed above, the circuit split has left pharmaceutical companies and companies who employ a similar sales forces without clear guidance as to how they should classify sales representatives for purposes of overtime. Such guidance, however, may be available soon. The United States Supreme Court recently agreed to hear an appeal from the Ninth Circuit case. A decision is expected in the spring of 2012.

In the meantime, companies with a workforce within the states covered by the Third Circuit should take note of a recent opinion from of the Eastern District of Pennsylvania, Ibanez v. Abbott Laboratories, which helps add some clarity to the scope of the “administrative” exemption to the FLSA’s overtime pay requirements.

Ibanez v. Abbott Laboratories

In Ibanez, Plaintiff Gerald Ibanez, a former pharmaceutical representative for Abbott Laboratories, Inc., claimed his employer did not pay him overtime because it misclassified its representatives as exempt from overtime requirements. Ibanez sued Abbott Laboratories under the FLSA and the Pennsylvania Minimum Wage Act of 1968 (“PMWA”), which has an administrative exemption provision that substantially mirrors that of the FLSA. Defendant Abbott Laboratories brought a motion for summary judgment, arguing that, under existing Third Circuit precedent, Ibanez was exempt from the overtime requirements under the administrative exemption.

Before discussing Ibanez’s specific duties as a pharmaceutical representative, the Court analyzed the statutory requirements of the FLSA’s administrative exemption provision. Essentially, this provision exempts from overtime pay those employees whose “primary duty includes the exercise of discretion and independent judgment with respect to matters of significance,” among other requirements.

Relying on two recent decisions within the Third Circuit dealing specifically with the administrative exemption as applied to pharmaceutical sales representatives, the Ibanez Court found that Plaintiff was an exempt employee falling under both the FLSA and PMWA’s administrative exemption provision. Critical to the Court’s conclusion in this regard was a finding that the Plaintiff’s engaged in

“short- and long-term business planning, including (but not limited to):

• Utilizing available resources to plan and implement strategies to drive business in [Plaintiff’s] territory, including frequent analysis of reports from the home office and the creation of a focused specific business plan;
• Developing solid plans to allocate and direct resources to keep physicians and drive business;
• Developing and utilizing key opinion leaders;
• Developing focus plans to direct resources to physicians that would bring the highest ROI;
• Participated in the creation of business plans which tracked doctors by market share and potential.”

Granting the Defendant’s motion for summary judgment, the District Court reasoned that “[t]hese activities [ ] are consistent with relevant definitions of exempt administrative work because they affect Defendant’s business operations to a substantial degree, and involve sales and promotional work on behalf of Defendant that reflect the exercise of discretion and independent judgment with respect to matters of significance.”

Conclusion

Until the Supreme Court resolves the question of whether pharmaceutical sales representatives who promote products are subject to any of the exemptions recognized by the FLSA, companies with similar sales representatives should be cautious when classifying such employees as exempt or nonexempt. Please feel free to contact any one of the attorneys in the Gibbons Employment and Labor Law Department should your company have any questions.

Michael J. Riccobono is an Associate in the Gibbons Employment & Labor Law Department.

Voluntary Classification Settlement Program

Under the VCSP, employers will have the opportunity to voluntarily reclassify their workers as employees for future tax periods with limited federal employment tax liability for the past non-employee treatment. At its core, the VCSP is “designed to increase tax compliance and reduce the burden on employers by providing greater certainty for employers, workers and the government.” The VCSP is open to employers who have erroneously treated workers as non-employees or independent contractors and who meet the following criteria:

• Consistently have treated the workers in the past as non-employees;
• Have filed all required Forms 1099 for the workers for the previous three years;
• Not currently under audit by the IRS, the DOL or a state agency concerning the classification of these workers.

Qualifying employers will:

1. pay 10% of the employment tax liability that may have been due on compensation paid to the workers for the most recent tax year;
2. will not be liable for any interest and penalties on the liability; and
3. not be subject to an employment tax audit with respect to the worker classification of the workers for prior years.

The VCSP provides employers an extraordinary opportunity to avoid the tax risks associated with misclassification of their workers. Employers should be cautioned, however, that the VCSP does not grant them total immunity. The previously misclassified workers may have claims for benefits and wages under either local, state and/or federal wage and hour laws.

Employee vs. Independent Contractor

As illustrated by the DOL’s MOU and the VCSP, worker misclassification is a serious issue. A recent study conducted by the Government Accountability Office estimated that the IRS is losing billions of dollars on worker misclassification, and a DOL study indicates that up to 30% of employers misclassify their workers.

The classification of a worker as either an “employee” or an “independent contractor” has significant implications for the employer’s payment of payroll taxes and workers’ compensation, unemployment and disability insurance, as well as compliance with minimum wage, overtime and other wage and hour laws.

Of course, determining whether a worker should properly be classified as an independent contractor or employee is no simple task. The Gibbons Employment & Labor Law Department can help you avoid misclassification issues, mitigate risks associated with same, and ensure compliance with applicable tax and employment laws. Please feel free to contact our attorneys for assistance.

Michael J. Riccobono is an Associate in the Gibbons Employment & Labor Law Department.

• Clarifying that certain occupations (e.g., public safety and health officers, licensed practical nurses, and paralegals) must be paid overtime in most cases;
• Specifically identifying dozens of job classifications that generally do or do not qualify as exempt under any of the white-collar exemptions; and
• Creating a “safe harbor” limiting liability for employers who take improper deductions from an exempt employee’s pay.

Upon the U.S. DOL’s implementation of the new regulations, many states followed suit by amending their corresponding state wage and hour exemptions to mirror the federal exemptions. Until now, New Jersey had not done so. Now, that New Jersey has adopted regulations akin to the federal rules, employers with any part of its workforce in New Jersey should review job classifications as they relate to Administrative, Executive, Professional, Outside Sales, and Computer employees. The newly adopted regulations may create opportunities for New Jersey employers to classify certain previously nonexempt employees as exempt. Employers, however, should still exercise caution when making these determinations.

The attorneys in the Gibbons Employment & Labor Law Department have been following these developments closely and would be happy to discuss with you the potential impact that these new regulations will have on your business. Please feel free to contact any of the attorneys in the Gibbons Employment & Labor Law Department with any questions that you may have.

Peter J. Dugan is an Associate in the Gibbons Employment & Labor Law Department.

Individual Liability

For individual corporate defendants, the FLSA’s definition of “employer” has been applied in circumstances where that individual had “operational control over the corporation.” Courts have consistently given an expansive interpretation of the term “employer” under the FLSA so as to effectuate the Act’s broad remedial purposes. To illustrate, courts focus on a number of factors, including, but not limited to: (a) the significant ownership interest of the corporate officers; (b) their operational control of significant aspects of the corporation’s day-to-day functions, including compensation of employees, hiring and discharging employees, and establishing other terms and conditions of employment; (c) the role played by the corporate officer in causing the corporation to under-compensate employees and to prefer the payment of other obligations and/or retention of profits. Importantly, there may be instances in which there are several simultaneous “employers” under the FLSA, any one of which is responsible for compliance with the Act and may be held liable. In other words, the fact that a corporate defendant is considered an employer under the FLSA does not preclude a determination that others are also employers for the purposes of the FLSA.

Depending on the facts of the case, courts have held corporate actors liable (in their individual, not representative, capacity) along with any other corporate entity or individual meeting the definition of “employer.” The potential exposure of officers, directors and agents includes back-pay, penalties, attorneys’ fees, liquidated damages, or any other relief a court may award in an FLSA lawsuit.

Conclusion

Individual corporate officers, directors and agents need to be mindful of the FLSA’s provisions regarding personal liability. To that end, corporate actors must ensure the prompt payment of all accrued employee wages. Should your company find itself unable to pay timely wages to your employees, consider options that could help avoid or minimize an unpaid wage claim, such as a possible reduction in pay rates, periodic furloughs, changes in vacation and/or PTO policies, or reductions in force. Of course, before implementing any of the aforementioned alternatives, please feel free to contact one of the attorneys in the Gibbons Employment & Labor Law Department.

Michael J. Riccobono is an Associate in the Gibbons Employment & Labor Law Department.

The DOL's press release makes clear that the application is meant to empower employees and to ensure that they are paid all wages owed to them by allowing employees to create their own records of time worked. Although the DOL presumably intends to utilize the data generated through employee use of the application to aid in its investigation of wage and hour violations, at this point, it is unclear to what extent the application data will be utilized in wage and hour enforcement and litigation. The application’s utility will ultimately depend on whether the information stored in the application is viewed as reliable by the DOL and by the courts. The reliability of the application’s timekeeping data will certainly be case-by-case, as it depends entirely on the employee’s accurate recording of hours worked, without any external checks. In addition, even putting aside those employees who may choose to intentionally fabricate their timekeeping records, there may be those employees who have misconceptions about when a work day starts and ends, thus impacting the reliability of the data stored in the application.

Fair Labor Standards Act

The FLSA prohibits the use of “oppressive child labor” in commerce or in the production of goods for commerce. This restriction, however, is premised on an employment relationship - an individual who, “without promise or expectation of compensation, but solely for his personal purpose or pleasure, work[s] in activities carried on by other persons either for their pleasure or profit,” - is thus outside the Act’s protections.

Court’s Decision

The first issue addressed by the court was the proper test to be used in determining whether such an employment relationship is present in a training or learning situation. Notably, the court rejected Laurelbrook’s argument that its status as an accredited vocational school should conclusively resolve the issue in its favor. Furthermore, the court explicitly rejected the Secretary’s application of a six-factor test created by the Department of Labor’s Wage and Hour Division (“WHD”) for distinguishing between employees and trainees. Stating that such a test “is overly rigid,” “inconsistent with a totality-of-the-circumstances approach,” and “inconsistent with prior WHD interpretations and opinions endorsing a flexible approach,” the Sixth Circuit Court of Appeals instead adopted the “primary benefit” test. This test focuses on which party - the purported employer or the student - receives the primary benefit of the work performed. “By focusing on the benefits flowing to each party, the test readily captures the distinction the FLSA attempts to make between trainees and employees. . . . It also helps to readily identify relationships Congress sought to stamp out by enacting the FLSA’s child labor provisions: relationships that place adult employees in competition with minors.” The court suggested that “[f]actors such as whether the relationship displaces paid employees and whether there is educational value derived from the relationship are relevant considerations that can guide the inquiry.”

Applying this test to the facts of the case, the court concluded that student-workers were non-employees, properly excluded from the coverage of the FLSA. In reaching this determination, the court considered both the tangible and intangible benefits to the students. For instance, students were “provided with hands-on training comparable to training provided in public school vocational courses” and “the opportunity to obtain such an education in an environment consistent with their beliefs.” In contrast, evidence established that Laurelbrook “[was] sufficiently staffed such that if the students did not perform work at the Sanitarium, the staff members could continue to provide the same services there without interruption” (i.e., no displacement of current Laurelbrook employees occurred). Although recognizing that Laurelbrook did gain some benefits from the students’ activities, the totality of the circumstances weighed in favor of a finding that no employment relationship existed between Laurelbrook and the students. Thus, no violation of the FLSA could be established.

Conclusion

Employers should be aware of the Sixth Circuit’s decision in Laurelbrook. Indeed, numerous courts from around the country have either expressly or implicitly adopted the “primary benefit” test in determining whether an employment relationship exists in the context of a training or learning situation (including the Fourth, Fifth, and Eighth Circuits, and the Eastern District of Pennsylvania). To ensure that they do not to run afoul of the FLSA minimum wage requirements, employers should carefully consider whether a student or trainee qualifies as an employee under the primary benefit test. To guide this inquiry, employers should keep in mind that such a designation is dependent on the totality of the circumstances, and no one aspect of the relationship is determinative.

To discuss your company’s policy needs, contact any attorney in the Gibbons Employment Law Department. And watch for more posts on training and information about exciting new Gibbons educational programs on this blog.

Michael J. Riccobono is an Associate in the Gibbons Employment Law Department.

The above disclosures must be given in English as well as the employees native language (if the NYDOL has provided a notice template in the employee’s primary language, with Spanish, Chinese, Korean, Creole, Polish, and Russian versions supposedly being made available soon on the NYDOL's website). Moreover, the WTPA requires that employers get signed acknowledgments from employees that verify the above disclosures.

To assist New York employers with compliance, the NYDOL has issued the following materials:

• Frequently Asked Questions (“FAQs”) about the Wage Theft Prevention Act
• Guidelines for Written Notice of Pay Rates and Regular Pay Day
• Instructions: Model Notice of Rates of Pay and Pay Days
• Model Pay Notice for Hourly Rate Employees
• Model Pay Notice for Multiple Hourly Rates
• Model Pay Notice for Employees Paid a Weekly Rate or Salary for a fixed number of hours (40 or fewer in a week)
• Model Pay Notice for Employees Paid a Salary for Varying Hours, Day Rate, Piece Rate, Flat Rate or Other Non-Hourly Pay
• Model Pay Notice for Prevailing Rate and Other Jobs
• Model Pay Notice for Exempt Employees

Based on the information released by the NYDOL, we wanted to bring the following WTPA-related items to your attention:

• Employers are not required to use the above-linked template forms. Employers can develop their own pay notices so long as they comply with the WTPA. Moreover, the NYDOL has specified that the notice obligations can be included in a letter and/or employment agreement; however, it must be on its own form. In other words, the NYDOL seems to be directing that the notice obligations appear on a separate page or pages from the rest of the agreement, such as in an appendix.
• The pay notice can be distributed electronically, but there must be a system in place where the employee can acknowledge the receipt of the notice as well as print copies.
• The NYDOL has specified that: (i) new-hire notices must be provided to employees hired on or after April 9, 2011 before they perform any work; and (ii) annual notices must be provided to all employees between January 1 and February 1 beginning in 2012. The WTPA’s annual notice requirement will not be satisfied if notice is given at any other time.
• Under the WTPA, employers are required to keep copies of the notices and acknowledgments for six years and must be able to provide them to the NYDOL upon request.
• If an employee refuses to acknowledge the notice, the NYDOL has instructed employers to still provide the notice and to note the employee’s refusal to sign.

In addition to the above notice requirements, the WTPA requires employers to provide certain information in writing along with each payment of wages. Specifically, the dates of work covered, the employer’s name, address and phone number, the employee’s 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, lodging), overtime rates, and the number of regular and overtime hours worked.

The NYDOL has indicated that employers can provide these pay statements electronically if the employee can access the statements on a computer provided by the employer and print a copy for their records. The NYDOL has indicated that it will at some point issue a sample pay statement that demonstrates the necessary entries.

Given that the WTPA became effective last month, now is a good time for employers to communicate with experienced wage and hour counsel regarding compliance strategies. If you have any questions, please feel free to contact any of the attorneys in the Gibbons Employment Law Department.

Peter J. Dugan is an Associate in the Gibbons Employment Law Department.

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.

Recordkeeping Obligations

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.

Expanded Remedies

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.

Anti-Retaliation

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.

Conclusion

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.