Effective April 12, 2011, New York employers must comply with the recently enacted Wage Theft Prevention Act (the "Act"), which substantially revises the wage and hour provisions of the New York Labor Law by imposing additional notice and record-keeping obligations on employers with respect to employee wages and by substantially increasing the penalties for violating the State's wage payment requirements. Set forth below is an overview of the additional burdens placed on employers and the increased penalties for noncompliance.
New Written Notification Requirements Relating to Pay
In New York, Section 195.1 of the Labor Law already requires that employers provide employees with written notice, at the time of hiring, of the employee's rate of pay, regular payday, and (for overtime eligible employees) regular hourly and overtime pay rates. The Act, however, expands upon those requirements. Starting in April, employers must provide employees -- at the time of hiring and on or before February 1 of each subsequent year -- with this additional information:
the basis for the employee's rate or rates of pay (e.g., hourly, salary or by shift, day, week, piece, commission or other); any allowances claimed by the employer as part of the minimum wage (e.g., tip, meal or lodging allowances); and information regarding the employer's name, any "doing business as" name, main office or principal place of business, and telephone number. Employers must also advise employees in writing at least seven days prior to the effective date of any subsequent pay change (unless the change is reflected in the pay statement that must be provided with every payment of wages).
The written notice must be provided in English and in the employee's primary language different from English. Furthermore, employers must obtain a signed and dated written acknowledgment from each employee -- also in English and the employee's primary language if different from English -- each time the notice is provided. To assist employers in complying with the Act's requirements, the Commissioner of Labor is required to prepare "dual-language" "templates" in English and such other languages as the Commissioner chooses based on the language demographics of the State. If the Commissioner does not issue a template in the employee's primary language, the Act directs employers to use the English language notice and acknowledgment. When the Act takes effect, employers will be required to retain the notice and signed acknowledgment for six years.
The Act also reiterates certain payroll record retention requirements that were previously set forth in the Department of Labor's regulations (12 N.Y.C.R.R. § 142-2.6). Specifically, employers must retain, for six years, payroll records for each employee showing the hours worked each week, rates and basis of pay, gross wages, deductions, allowances, net wages, and (for overtime eligible employees) the regular and overtime pay rates and number of regular and overtime hours worked. The Act further mandates that employers provide the same information in each pay stub that must accompany every payment of wages.
Broader Protection Against Retaliation
The Act adds new anti-retaliation language to New York's Labor Law. In particular, the Act provides relief for employees who are retaliated against (i) for making a good faith complaint about a violation of the Labor Law's wage payment requirements to the employer, the Commissioner of Labor or the Attorney General's Office; or (ii) because the employer believes that the employee made such a complaint. The Act also broadens the definition of what constitutes actionable retaliation to include employer threats rather than being limited to adverse employment actions like demotions and discharges.
Increased Penalties and Posting Requirements
The Act increases an employer's exposure to penalties and damages in a number of ways.
For example, the Act creates a civil remedy for employees who are not provided the written notice of pay information within 10 days of the start of employment. A prevailing employee may recover damages of $50 for each week that the notice is not provided, up to a maximum of $2,500, plus reasonable attorney's fees, costs and potential injunctive relief.
Similarly, the Act establishes a civil remedy for an employee who is not provided with a weekly pay stub containing the requisite information described above. The employee is entitled to damages of $100 for each week that the pay stub is not provided, up to a maximum of $2,500, plus reasonable attorney's fees, costs and potential injunctive relief.
Furthermore, where an employer violates the Labor Law's wage and hour requirements, the Act increases the amount of liquidated damages (which are in addition to a back wage award) available to aggrieved individuals from 25% to 100% of the back wages owed, unless the employer can prove it had a good faith basis for believing it was in compliance with the law.
If an employer fails to pay a final, unappealed judgment under the Labor Law within 90 days, the Act increases the amount of the judgment by 15%. Equally important, both employees and the Commissioner of Labor will be entitled to collect attorney's fees and costs incurred in enforcing a judgment against an employer.
Moreover, the Act creates enhanced remedies for violations of the Labor Law's anti-retaliation provisions. The Commissioner may assess a civil penalty ranging from $1,000 to $10,000 and grant various forms of injunctive and monetary relief to the employer, such as back pay, reinstatement or front pay in lieu of reinstatement, and liquidated damages (up to $10,000) for each aggrieved employee. Employees may file a civil action seeking injunctive relief, liquidated damages (capped at $10,000), back pay, reinstatement or front pay in lieu thereof, attorney's fees, and costs.
The Act also expands the Commissioner's power to include requiring an employer to post at the workplace notices describing the employer's violations of the Labor Law. Where an employer willfully fails to pay required wages, the Commissioner may order the employer to post a notice describing the violation in an area visible to the general public for up to 90 days. Postings for non-willful violations may be required for up to a year in areas that may be viewed by employees only.
Finally, the Act increases the criminal penalties that may be imposed against employers that violate the State's minimum wage and overtime pay requirements. Upon conviction, the employer faces a fine ranging from $500 to $20,000 or imprisonment for up to one year for a first offense. Notably, each weekly payment that is less than the required minimum wage or overtime payment constitutes a separate offense.
Good-Faith Defenses and Prevention
The increased penalties and enhanced remedies within the Act, coupled with the existing six-year statute of limitations for wage-related lawsuits by employees, will make New York's wage and hour law one of the harshest in the country. Employers would be wise to focus on reducing their risks by preparing now for compliance starting on April 12, 2011.
Among other things, employers should review and update their pay stub forms and take steps to increase payroll record retention to a minimum of six years. Moreover, the increased exposure to liquidated damages under the Act may be eliminated or reduced for employers who act with "good faith." One way to demonstrate good faith is to conduct a self-audit of payroll, timekeeping and classification practices. Employers may consider working with outside counsel on a self-audit to maximize the availability of good-faith defenses in the event of legal challenges and to limit disclosure of the audit through the protection of applicable privileges.