New York Enacts Wage Theft Prevention Act

On December 13, 2010, Governor David Paterson signed into law the New York Wage Theft Prevention Act (the “Act”).  The new law was enacted partly in response to a recent study by the National Employment Law Project, an employment rights advocacy group, which estimated that New York City workers are underpaid by more than $1 billion annually.  The Act imposes significant new record-keeping and notice requirements and increases the penalties for non-compliance with New York’s wage and hour laws.  Below is a summary of the Act’s key provisions.

Notice Requirements

The new Act’s record-keeping and notice requirements on employers take effect as of April 9, 2011, and the Act empowers the New York State Department of Labor (NYSDOL) to adopt regulations providing for additional requirements. 

Under the Act, at the time of hiring, and annually before February 2, an employer is required to provide each employee with a notice (in both English and in the employee’s self-identified primary language) containing (1) rate of pay; (2) basis for pay (i.e., hourly, shift, weekly, salary, piece, commission, etc.); (3) any allowance the employer intends to claim as part of the minimum wage; (4) the regular payday; (5) the name of the employer and any “doing business as” names; (6) the physical address of the employer’s main office; and (7) the employer’s telephone number.  The notice must also state the regular rate of pay and overtime rate for non-exempt employees.  The employee must sign an acknowledgment of receipt of this notice, which the employer must retain for six years.  Moreover, if any information included in the notice changes, the employer must provide the employee with notice at least seven calendar days prior to the change, unless the changes are included on the employee’s periodic wage statement (such as a check stub).

If an employee does not receive this notice within 10 business days of starting employment, the employee is entitled to a payment of $50 per work week for each week the notice is not provided, not to exceed $2,500, together with costs and attorney fees.

The Act also requires employers to provide certain information in the statement given to employees with every payment of wages, such as the pay stubs or wage statements regularly provided to employees. Under the act, each statement must now include (1) the dates of work covered by the wages paid; (2) the name of the employee; (3) the name, address and telephone number of the employer; (4) the rate(s) of pay and the basis for them (i.e., hourly, shift, weekly, salary, piece, commission, etc.); (5) gross wages; (6) deductions; (7) allowances claimed; and (8) net wages.  For non-exempt employees, the pay stub must also include (1) the regularly hourly rate; (2) the overtime rate; (3) the number of regular hours worked; and (4) the number of overtime hours worked.  For employees paid at a piece rate, the statement must include the applicable piece rate and the number of pieces completed.  The employer must retain payroll records containing this information for six years. 

If an employee does not receive the required statement, the employee can recover a penalty of $100 per work week for which the statement was not provided, not to exceed $2,500, together with costs and attorney fees.

Increased Penalties for Wage Violations

Wholly apart from these new notice and recordkeeping requirements, the Act imposes significant new civil and criminal penalties on employers who fail to pay employees wages or overtime earned.  Most notably, the Act increases the amount of liquidated damages available under the State Labor Law from 25% of unpaid wages to 100%, conforming to the liquidated damages available under the corresponding federal law, the Fair Labor Standards Act.  In addition, if a violation is found and the employer fails to pay a final judgment within 90 days, an employee may recover an additional 15% in liquidated damages.  Employees may also recover prejudgment interest (as well as attorney’s fees, which were also available under prior law).

The Act also provides for criminal penalties.  An employer who fails to pay an employee the minimum wage or overtime due is subject to a fine ranging from $500 to $20,000 and could be subject to imprisonment.  An employer also may be found guilty of a criminal offense if it willfully fails to pay required wages and that failure results in aggregate underpayments of more than $100,000; the level of the offense, term of imprisonment, and fine is dependent upon the amount of the underpayment.  The Act also expands criminal liability to the officers and agents of partnerships and limited liability companies, where it had previously applied only to corporations and their officers and agents.

Anti-Retaliation Provisions

Finally, the Act enhances the protections against retaliation for employees who complain about unpaid wages or overtime.  An employee will now be protected by retaliation from any “individual,” not just individuals who fall under the definition of an “employer.”  In addition, an employee is protected even if he or she is retaliated against because someone believed that the employee had complained about unpaid wages, even if the employee did not actually complain.  Moreover, employers should be mindful of the fact that the employee’s complaint need not make specific reference to the Labor Law in order to be protected. 

Employees who are subjected to unlawful retaliation can recover up to $10,000 in statutory damages, in addition to compensatory damages, as well as injunctive relief such as reinstatement or front pay.  The filing of a complaint with the NYSDOL also tolls the two-year period within which the employee can bring a court action. 

Given these enhanced protections, all employers should review their record-keeping and wage payment policies and practices to ensure compliance with their obligations under the Act as well as longstanding requirements under the New York Labor Law.  If you have any questions about this new Act, please do not hesitate to contact any of our attorneys.