New York Labor Law Changes and Claims for Deductions

New York governors seem to have a habit of favoring employees with labor law freebies when they leave the executive mansion. (Remember the Wage Theft Prevention Act, signed by David Paterson days before he left office in December 2010?) On August 20, 2021, four days before his resignation was to take effect, former Governor Andrew Cuomo signed the “No Wage Theft Loophole Act” (the “Act”), which amended sections 193 and 198 of the Labor Act to state that “[t]there is no exception to liability [under those sections] for the unauthorized non-payment of wages, benefits or salary supplements. The law was intended to clarify that employees can file claims under Section 193 not only for unauthorized “line items” deductions from wages, but also for mass withholding of allegedly owed wages.

How we got here

Section 193 of the Labor Act prohibits a wide range of “deductions” from “wages” and Section 198 provides a right of civil action for violations of Section 193. For years, litigants have debated whether the non-payment of wages —for example, a bonus allegedly due – constitutes a “deduction” for the purposes of section 193. 100% deduction from wages. The alleged violation of Section 193 triggers a right to sue under Section 198(1-a), under which a successful plaintiff may recover not only amounts unlawfully withheld, but also lawyer’s fees, pre-judgment interest and (in the absence of good faith on the part of the employer) a fixed indemnity equal to 100% of the recognized salary due.

Employers have historically (and successfully) defended such claims on the grounds that a massive withholding of compensation is not a “deduction” within the meaning of Section 193 – an argument validated by many courts, including the Appeal Division in Perella Weinberg Partners LLC vs. Kramer153 AD3d 443 (1st department 2017). As explained by the trial court in Kramera “deduction” means ” [mean] partial withholding of compensation” for a specific purpose. Other appellate courts have agreed, confirming that to state a claim for a violation of section 193, a plaintiff must allege a specific ground. deduction wages, and not just a payment default wages.

The distinction is significant, because the only other section of the Labor Act that provides for a substantial claim for non-payment of wages is section 191, which excludes from its protection employees who work in administrative, executive or professional functions. and earn over $900 a year. the week. As employers have argued, allowing a plaintiff to sue under Section 193 for massive wage deduction (as opposed to improper deduction) would render the limitations of Section 191 meaningless. and, as the Court of Appeal noted in Gottlieb vs. Kenneth D. Laub & Co., 82 NY2d 457 (1993) — “offering exceptional remedy to [a] litigant[ ] to whom the legislature has consciously chosen not to afford the protections and benefits of the statutory wage payment provisions of the Labor Act.

Wage Theft Loopholes Act

The law was intended to fill this so-called “gap” in the law. As the Assembly explained in memory in support of the new law:

[M]Much confusion has arisen over the term “deduction” and what it might possibly represent. For many of us, “deduction” conjures up a literal notation on a pay stub of wages being subtracted, leading to the question: what if wage theft isn’t indicated by a line on a pay stub? ? One can imagine a whole host of scenarios, for example, that clearly violate the intent of section 193 without conforming to this narrow definition of a “deduction”. An employer could withhold wages but simply fail to note the deduction on a pay stub, for example. Alternatively, an employer could deny the existence of the full amount of wages owed and claim that the employee’s paycheck that month was a discretionary amount that the employer decided based on the quality of the employee’s work. employee. Or, an employer could choose to withhold wages entirely, as the law simply prohibits “ANY” deduction. But does “any” mean “all”? What if the law does not prohibit the withholding of full wages?

While it may seem obvious that a “deduction” in the context of wage theft is meant to involve the taking of wages, the case law relating to the provisions of section 6 has painted a much more nuanced and confusing picture…. New York’s labor law, then, which should be a model for the rest of the nation in defending employee rights, finds itself watered down by a court-created loophole.

It is therefore necessary for the legislator to close once and for all this judicially created loophole to specify that employees must be paid what is due to them whatever happens. This will help defend the rights of all employees, including low-income employees who are more likely to be victims of wage theft. New York cannot in good faith claim to be one of the most progressive states in the country when it comes to labor rights if we do not make it clear that wage theft is, and always has been, completely prohibited inside our borders.

As of August 20, 2021, sections 193(5) and 198(3) of the Labor Code now contain the following identical provision: “There is no exception to liability under this section for the non -unauthorized payment of wages, benefits or salary supplements.”

The essential

The amendments open the door to a wider range of employees to assert legal claims for non-payment of compensation allegedly due. Of course, if compensation is not due in the first place, there is no recourse under labor law. As the The Appeal Division clarified, an employee “cannot assert a legal claim for wages under labor law if he has no enforceable contractual right to such wages”. Employers should always confirm compensation agreements with employees in writing (for example, in a letter of offer or contract of employment), and clearly indicate that no modification of these conditions will be effective without a written agreement signed by the employer. Policies under which employees may be eligible for additional compensation (for example, bonuses or other incentive schemes) must be carefully drafted to ensure that compensation is deemed earned and payable only in the specific circumstances in which the employer intends it to be due. As simple as it sounds, the best defense against any wage claim – whether the claim arises at common law or statute – is for the documents to clearly state that nothing is owed.

© 2022 Proskauer Rose LLP. National Law Review, Volume XI, Number 263