Reflecting a growing trend among states to adopt enhanced penalty and enforcement provisions in their wage-and-hour laws, on December 13, 2010, New York Governor David A. Paterson signed into law the Wage Theft Prevention Act (the “Act”). The Act, which goes into effect April 12, 2011, amends the New York Labor Law in several significant areas, including additions to notification requirements for employers, increases in penalties for employer violations of state wage requirements, expansion of the enforcement powers of the Commissioner of Labor, and enhanced anti-retaliation protections for workers who make good-faith complaints about what they reasonably believe to be violations of the New York Labor Law. A summary of the Act’s key provisions is found below.

The New York Wage Theft Prevention Act

In 2009, New York added to the Labor Law a notice requirement requiring employers to inform new hires in writing of their rate of pay and the manner in which it is paid (for example, by the hour or week, by salary, or through commission), any allowances against the minimum wage, the designated pay day, and the employer’s name, address, and telephone number. The Act places further notice obligations on employers. In addition to requiring the notice to each newly hired employee, the Act requires this notice to be provided to each incumbent employee by February 1 of each year of the worker’s employment. The notice must be provided both in English and in the employee’s primary language, if the primary language is not English. Records of the notice and the employee’s signed acknowledgment of receipt of the notice must be maintained by the employer for six years. Penalties for failing to provide the required notices include damages of $50 per workweek (up to a maximum of $2,500 in a private lawsuit) for the duration of the violation, plus costs and attorney’s fees.

The Act further requires employers to provide with each wage payment a statement specifying the dates of work covered by the payment; the employer’s name, address, and telephone number; the rate of pay and manner in which it is paid; gross wages; net wages; deductions; allowances against the minimum wage; and, for nonexempt employees, the regular rate, overtime rate, and number of regular and overtime hours worked in the pay period. Upon request by the employee, an employer must provide a written explanation of how wages were calculated. E mployers must maintain accurate payroll records, including the information required on the statements, for six years. Penalties for failure to provide the wage information with each payroll statement include damages of $100 per week (up to a maximum of $2,500 in a private lawsuit) for the duration of the violation, plus costs and attorney’s fees.

The Labor Law permits the Commissioner of Labor to seek liquidated damages when a violation is shown and the employer is unable to prove that it had a good-faith basis for believing that it was acting in compliance with the law. The Act increases the amount of liquidated damages that may be sought from 25 percent of the total amount of wages due to 100 percent.

The Act also permits the Commissioner to order additional remedies in the event of retaliation against an employee for complaining about noncompliance with the New York Labor Law. These new remedies include injunctive relief, liquidated damages of up to $10,000, reinstatement with back pay, and front pay.

Under the Act, employers that engage in continuous or egregious violations of the wage-related provisions of the Labor Law may be subject to civil penalties of up to double the total amount of wages, benefits, or wage supplements due, and the Commissioner may assess an additional penalty of 15 percent if the employer fails to make payments within 90 days of an order by the Commissioner.

Employers that fail to pay the minimum wage or overtime compensation due may be subject to new criminal and monetary penalties pursuant to the Act. Any employer that pays less than the amount owed may be guilty of a misdemeanor punishable by a fine of $500 to $20,000 or imprisonment of up to one year. A second violation within six months constitutes a felony. Additionally, the Act requires employers who engage in Labor Law violations to post documentation explaining the violation for up to a year in an area visible to employees.

Practical Implications

The Act substantially increases the penalties an employer may face for failure to comply with New York’s wage-and-hour laws. Employers with employees in New York should review their payroll and record-keeping practices and make necessary adjustments prior to the Act’s April 12, 2011 effective date to ensure compliance and prevent costly errors.

The Act continues the trend of enacting more stringent and pro-employee wage-and-hour laws by state legislatures. For example, in July 2010, Illinois enacted similar sweeping changes to its state wage-and-hour laws, adding enhanced civil and criminal penalties for “wage theft” by employers and increased employee protections against retaliation. A number of other states are considering such legislation. In addition, several states, including Connecticut, New York, Pennsylvania, and Washington, enacted laws in 2010 cracking down on employer misclassification of workers as independent contractors. Employers nationwide should continue to exercise caution in ensuring their compliance with existing wage-and-hour laws in states in which they employ workers and should monitor changes and developments in those laws.