Notices on hiring and annual notices
Pay statements
Monetary damages and other penalties
Retaliation
Comment
In 2009 Section 195 of the New York Labour Law was amended to require employers to provide certain written information to newly hired employees, including their rates of pay, their regular payday and, if non-exempt, their regular hourly and overtime rates of pay. At the end of 2010 the New York State Wage Theft Prevention Act was signed by then-Governor Paterson, adding additional obligations for employers under the Labour Law. The act took effect on April 9 2011. Employers ignore the statute's requirements at their peril in light of the potential monetary damages and other penalties for violations of the Labour Law.
Notices on hiring and annual notices
The new requirements under Section 195 of the Labour Law, including those pursuant to the act, mandate that employers provide wage information to employees on their hiring and on an annual basis thereafter. The information that must be provided includes:
- the rate of pay;
- the regular payday;
- the regular hourly rate (for non-exempt employees);
- the overtime rate of pay (for non-exempt employees);
- the basis of the wage payment (eg, salary, hourly, commission);
- any allowances claimed as part of the minimum wage (eg, tip, meal or lodging allowances);
- the name of the employer, the physical address of its main office or principal place of business and its postal address if different, and its telephone number; and
- any 'doing business as' name(s) of the employer.
In addition to providing this information within 10 business days of the employee's commencement of employment, employers are required to furnish a written wage notice to every employee each year between January 1 and February 1 containing the information outlined above; notices at other times of the year do not satisfy the annual notice requirement. The first such deadline is February 1 2012. Employers must also obtain a signed and dated acknowledgment from each employee of his or her receipt of both the pre-hire notice and the annual notice. Copies of these documents must be provided to employees and these records must be maintained for six years.
The act requires the New York State Department of Labour to prepare templates that comply with the requirements of the statute, and sample notices are now available on the department's website (www.labor.ny.gov). However, an employer may use any form that it wishes, provided that the statute's requirements are met.
The notices and acknowledgements must be in English and in the language "identified by each employee as the primary language of such employee". However, this requirement applies only with respect to those languages for which the department provides a template. In addition to English,it has supplied templates in Spanish, Chinese and Korean, and has indicated it will supply them in Creole, Russian and Polish.
The act provides that the notice must be updated and provided again to the employee at least seven days before any changes to the employee's pay or other terms contained in the notice, unless such changes are reflected in the employee's pay statement (see below). The department has taken a more expansive position, stating that:
"notice is not required where there is an increase in a rate and the new rate is shown on the next payment of wages. For any reduction of wage rate, an employee must be notified in writing prior to the reduction being implemented."
An additional requirement under the act is that the employee must affirm that the employee accurately identified his or her primary language to the employer and that the notice provided by the employer at the time of hiring and in the annual notice to such employee was in the language so identified or otherwise complied with the statute.
The act requires that employees be provided on each payday with a pay statement listing:
- the dates of work covered by that payment;
- the name of the employee;
- the name, address and phone number of the employer;
- the rate of pay and basis thereof (eg, salary, hourly, commission);
- the gross wages;
- any deductions;
- any allowances claimed as part of the minimum wage; and
- the net wages.
For non-exempt employees, the statement must also include the employee's regular hourly rate and overtime rate, the number of regular hours worked and the number of overtime hours worked. Employers are required to maintain these payroll records for at least six years.
Monetary damages and other penalties
Before the adoption of the New York State Wage Theft Prevention Act, an employer would be liable for underpayment of wages for the full amount of the underpayment plus interest; other potential recoveries included reasonable attorneys' fees and liquidated damages up to 25% for wilful violations. The act leaves intact the employer's liability for unpaid wages, interest and the right to recover reasonable attorneys' fees. With respect to liquidated damages, the act provides that unless the employer proves a good-faith basis to believe that its underpayment of wages complied with the law, liquidated damages equal to 100% of the total amount of the wages found to be due may be recovered. The statute also permits an employee (or the New York State Department of Labour in an action brought on behalf of the employee) to recover pre-judgment interest if the employee prevails in the action. In addition, any judgment that remains unpaid after 90 days is subject to a 15% increase.
The act also includes penalties for violations of the notice and pay statement requirements contained in Section 195 of the Labour Law. An employee who is not provided with the required notice within 10 business days of the commencement of his or her employment may recover in a civil action damages of $50 a week (to a maximum of $2,500), plus attorneys' fees; the department may also bring an action to enforce this notice requirement and assess against the employer damages of $50 a week, with no cap on such damages. An employee who is not provided with the required pay statement may recover in a civil action damages of $100 a week (to a maximum of $2,500), plus attorneys' fees; the department may also bring an action to enforce the pay statement requirement and assess against the employer damages of $100 a week, again with no cap on such damages. Injunctive relief for violations of the notice and pay statement requirements is also available. In any such action described in this paragraph, the employer may establish an affirmative defence by demonstrating that:
- it made complete and timely payment of all wages to the employee; or
- it reasonably believed in good faith that it was not required to provide the employee with such notice.
However, it is unclear whether the good-faith affirmative defence will be applicable other than in rare circumstances.
The act adds posting requirements for employer violations of the wage payment laws. The New York State Department of Labour has the power to require an employer to post, in an area visible to employees, a notice summarising the violations. For a wilful failure to pay wages, the employer may also be required by the department to post a notice of the violations in an area visible to the general public for up to 90 days.
Steeper penalties await employers whose violations of the wage payment or minimum wage requirements of the Labour Law are deemed by the department to have been wilful or egregious, or who have previously violated such requirements of the Labour Law. Under such circumstances, in addition to paying the unpaid wages, benefits or wage supplements and liquidated damages in the amount of 100% of unpaid wages, such employers may be liable for an additional sum as a civil penalty, not to exceed double the total amount of wages, benefits or wage supplements found to be due.
Further, employers and their officers and agents may be criminally liable for their failure to pay minimum wages or overtime compensation in violation of the Labour Law. Previously, only corporations and their officers and agents were subject to such criminal penalties; the act adds partnerships and limited liability companies (and thus their officers and agents) as entities and individuals who may be subject to criminal penalties for these types of violation.
The act prohibits retaliation against an employee who complains that his or her employer engaged in conduct that the employee, reasonably and in good faith, believes constituted a Labour Law violation. It expressly provides that the employee need not make explicit reference to the Labour Law to trigger its anti-retaliation protections. The employee may recover in a civil action against any employer or persons alleged to have violated the anti-retaliation provisions. The court may:
- award back pay, front pay, liquidated damages not to exceed $10,000 and reasonable attorneys' fees;
- enjoin the offending employer and persons from such conduct; and
- order reinstatement in lieu of front pay.
The statute also grants the New York State Department of Labour authority to remedy such retaliation. Conduct in violation of these anti-retaliation provisions also has criminal ramifications, being classified as a Class B misdemeanour.
The administrative burdens imposed by the New York State Wage Theft Prevention Act are significant. Employers must become familiar with its requirements of the act and immediately update their payroll practices to avoid the risks of monetary damages and other penalties for notice, wage payment and other violations of the Labour Law. The templates developed by the department satisfy the notice requirements of the act, and employers must become familiar with these templates or develop their own wage notices to satisfy these requirements. The department has indicated that the notice requirements may not be satisfied by the inclusion of this information in the text of an offer letter or employment agreement. The agency has stated that the information may be part of the offer letter or employment agreement, but it must be included on its own form; employers should consider including the notice required on commencement of employment in the first-day hire documents provided to employees. Pay statements must also be updated and recordkeeping practices must be implemented.
The misclassification of workers as independent contractors instead of employees exposes employers to large potential liabilities. The adoption of the act exacerbates these risks because misclassified workers, by definition, will not receive the required notices and pay statements and may now recover larger liquidated damages for failure to receive required wage payments. Employers should examine those workers that are currently classified as independent contractors to ensure that such workers have been properly classified and consider the additional risks posed by the act when making future classifications.
Similarly, litigation regarding an employer's classification of an employee as exempt or non-exempt has proliferated in recent years as employees classified as exempt seek to recover overtime by asserting they should have been classified as non-exempt. The New York State Wage Theft Prevention Act serves as a further inducement for employers to consider exempt versus non-exempt classifications, particularly in light of the increase in the liquidated damages cap from 25% to 100% and the statute's notice and recordkeeping requirements.
For further information on this topic please contact Kevin B Leblang or Robert N Holtzman at Kramer Levin Naftalis & Frankel LLP by telephone (+1 212 715 9100), fax (+1 212 715 8000) or email ([email protected] or [email protected]).