On April 12, 2011, the Wage Theft Prevention Act (“the Act”) which was signed into law in December by Governor David Patterson will take effect.  None of the provisions of the Act apply to public sector employers.[1]

The Act will amend various sections of the New York State Labor Law. [2]  It provides enhanced enforcement of workplace rights of employees with respect to payment of wages and wage payment notices.  The name of the Act reflects the unsubstantiated notion that employers have been stealing wages from employees by not paying them as required by federal and state labor laws.

The Act does not provide employees many additional rights that did not otherwise exist under federal and state law, but it substantially increases the enforcement of existing laws with respect to notice and record keeping, and increases penalties for violation of wage and hour laws.  It addresses the failure by employers to pay statutorily-mandated minimum wages and overtime by requiring annual notifications of wages, expanding notifications, enhancing available remedies for wage law violations and strengthening whistleblower protections.

The Act makes the following substantive changes that employers should be aware of:

Additional Notice and Record Keeping Requirements

Previously, New York Labor Law Section 195(1) required employers to notify all newly hired employees at the time of hiring, in writing, of their regular rate of pay, regular pay day, and overtime rate of pay if they will be eligible for overtime. The Act now requires employers to include the following additional information in the notice:

• In addition to the rate of pay, the basis of the wage payment (e.g., whether paid by the hour, shift, day, week, salary, piece, or commission, or on another basis)
• The employer’s intent to claim allowances (e.g., tip, meal or lodging allowances) as part of the minimum wage
• Additional information about the employer, including any d/b/a names

The Act requires that the notice be updated and provided again to the employee at least seven calendar days prior to any changes to the employee’s pay or other terms contained in the notice (unless such changes are reflected in the employee’s wage statement).

The Act also requires that the notice be provided to the employee both in English and in the language identified by the employee as his or her primary language. The employer is required to obtain from each employee a signed and dated written acknowledgment, in English and in the primary language of the employee, of receipt of the notice.

For current employees, the Act now requires that employers provide the above information at least annually (by February 1^st of each year) to all employees in writing and obtain a signed and date acknowledgement from each employee.  Under the enhanced record keeping requirements of the Act, the employer must maintain the signed employee acknowledgements for at least six years. The Act also increases the length of time an employer must preserve and maintain other payroll records from three to six years.

Additionally, each paycheck must also be accompanied by a statement of wages that includes all information listed above, as well as the dates covered by the payment and the basis for calculating the payment due.  Upon request by an employee, the employer must provide a written basis for the wage calculations in an employee’s payment.

Enhanced Civil and Criminal Penalties

Employers are subject to significantly increased civil and criminal penalties and disclosure requirements relating to alleged noncompliance with the Act’s requirements and the improper payment of wages.

1.  The Act increases the civil penalties imposed upon an employer for any violation, including paying less than the wage to which an employee is entitled. Under the current New York Labor Law, liquidated damages for nonpayment of wages are capped at 25% of the total amount of the wages found to be due. The proposed legislation, however, increases the amount of liquidated damages to 100% of that amount. An employer will also be assessed an additional 15% in liquidated damages if it defaults on paying a final judgment for more than 90 days.

2.  The Act provides for the recovery of prejudgment interest and attorneys’ fees in any civil action to recover unpaid wages brought by an employee or by the state’s labor commissioner. For willful or egregious violations, additional payments may also be assessed against an employer, up to double the total amount found to be due.

3.  The Act adds civil penalties for employers that fail to provide employees with the required notices of wages required by Section 195. An employee who does not receive a notice of wages within 10 business days of his or her first day of employment may bring a civil action to recover damages of $50 for each work week that the violation occurred or continues to occur (not to exceed a total of $2,500) plus costs and reasonable attorneys’ fees.  An employee that is not provided with the appropriate statement of wages paid along with the payment of wages may be entitled to bring a civil action to recover damages of $100 for each work week that the violation occurred and continues to occur (not to exceed $2,500).  Costs and attorneys fees are still available for all civil actions to collect wages as well.  Alternatively, the Act permits the labor commissioner to bring a civil or administrative action on behalf of the employee to collect or assess such damages from the employer.  The commissioner now may also collect attorney fees and costs on behalf of an employee or commissioner in enforcing any court order.

4.  The Act expands the types of businesses subject to criminal penalties for nonpayment of wages to include partnerships and limited liability corporations. Currently, criminal penalties under the New York Labor Law apply only to corporations and their officers and agents.

Retaliation Provisions

The Act enhances the anti retaliation provisions of the New York Labor Law to further protect employees who complain of conduct that they reasonably and in good faith believe constitutes a violation of the New York Labor Law. Under the Act, the labor commissioner is given authority to remedy retaliation with powers that parallel those of the courts, including the ability to take the following actions:

• Award compensatory damages
• Enjoin the offending conduct
• Order payment of liquidated damages (not to exceed $10,000)
• Order injunctive relief, including the rehiring or reinstatement of the employee or front pay in lieu of reinstatement

The Act also provides that the two-year statute of limitations for an employee to bring a retaliation action in court shall be tolled if an employee files a complaint with the labor commission. Specifically, the Act provides for tolling of the statute of limitations from the date an employee files a complaint with the labor commission or the date on which the labor commissioner commences an investigation, whichever is earlier, until the later of the date an order to comply issued by the commissioner becomes final or the date on which the commissioner notifies the complainant that its investigation has concluded.

Additionally, the Act requires that the commissioner maintain confidentiality with respect to the names of employees that are the subject of an investigation unless necessary to resolving the complaint.

Expanded Enforcement Powers of the New York State Department of Labor

The Act provides enhanced power to the labor commissioner, making it easier to collect damages from employers that violate the law. For example, the Act would allow the commissioner to institute administrative actions (as opposed to a civil judicial action) to recover penalties and collect claims. The commissioner is given the ability under the Act to require an employer that defaults on an administrative order to provide an accounting of all of its assets. 

In the event that you have any questions concerning The Wage Theft Prevention Act and the new enforcement procedures and penalties, please contact our Labor and Employment group.

[1] The Act amends articles 6, 7 and 19, all of which exclude public employers from the definition of employee and employer.

[2] Including sections 195, 196, 196-a, 197, 198, 198-a, 199-a, 215, 218, 219, 219-c, 661, 662, and 663.