Long Weekend – Short Payroll Cycles

Long Weekend – Short Payroll Cycles

Memorial Day weekend has arrived. The good news? It’s the unofficial start of summer. The bad news? Here in the Northeast, it’s 53 degrees and you’re probably reading this instead of sitting by a pool. But we have good news for employers (yes, it does occasionally happen): New York just gave employers a massive break on one of the most maddening legal technicalities out there. So, if you’re already down the shore pretending you’re not cold, or just counting the minutes until you can log off, we’ve got a story for you.

Frequency of Pay Reign of Terror

After years of anxiety over technical violations turning into six-figure lawsuits, New York employers finally have some relief. The New York State Legislature and Governor Hochul have amended the New York Labor Law (NYLL) to limit the damages available in so-called “frequency-of-pay” actions — lawsuits brought by employees claiming their employer failed to pay wages within the strict time frame outlined in the statute. These claims are most often filed by “manual workers,” as Section 191 of the NYLL requires such employees to be paid weekly — “not later than seven calendar days after the end of the week in which the wages are earned.”

How We Got Here

Like many states, New York has laws about how often employees must be paid. Commissioned salespersons at least monthly, clerical workers at least semi-monthly, and manual workers at least weekly, etc. Fail to comply with these rules and you’re exposed to three main types of damages: backpay, liquidated damages (up to 100%), and attorneys’ fees. Enter Vega v. CM & Associates Construction Management, a 2019 New York appellate decision where an employer paid its manual workers bi-weekly instead of weekly. That was essentially it, and by all accounts, everything else was above board – including paying minimum wage and overtime. But the plaintiff’s attorney argued that since wages weren’t paid weekly, that alone triggered the NYLL’s damages provisions. So even though no wages were actually missing, the lawsuit sought liquidated damages equal to the first week of every pay period — and of course, attorneys’ fees (yes, this is one of those times demonstrating why people really hate lawyers).

To help illustrate this: if a manual worker was making $500 per week and was paid $1,000 every two weeks, they could sue for $500 in liquidated damages for every pay period – simply because the money for Week 1 arrived a week “late”, despite being part of a full paycheck.

Well, the Vega court agreed with the plaintiff and . . .

*LAWSUITS*

Immediately following Vega there was a flood of copycat lawsuits, many filed as class actions, seeking 50% of total wages over a period up to six-years. Employers across New York were suddenly staring down six and seven figure exposures over technicalities.  

Relief (Kind Of)

A few weeks ago, Governor Hochul tucked an amendment into the state’s new budget that reins in some of the most aggressive parts of these frequency-of-pay lawsuits. Here are the key points:

• Limited liquidated damages! If a manual worker is paid on a regular payday at least semi-monthly, liquidated damages are no longer available. Instead, damages are limited to interest on the delayed payment, calculated using New York’s statutory interest rate (currently 16% annually . . . and you thought the Sopranos had a high vig). So, if a $2,000 bi-weekly paycheck was “late” by seven days, the damages would be about $6.14 – not $1,000. Progress!
• The news is not as good for repeat offenders. For conduct after May 9, employers with a prior final order (no pending appeal, no active challenge) for violating Section 191(1)(a) may still face 100% liquidated damages if they do it again.
• Notably, the amendment didn’t touch the recovery of attorneys’ fees. Well played, plaintiffs bar. Well played.

Takeaways

This amendment brings long-overdue relief for employers who’ve been hit by one of these shakedowns lawsuits. That said, full damages are still available against repeat offenders, and the amendment did nothing to answer the lingering question of whether these extortion attempts lawsuits can even be privately filed, or clarify who qualifies as a “manual worker” (the NY DOL has long interpreted that term to include anyone spending at least 25% of their time on physical labor, which almost jokingly encompasses a wide range of roles not traditionally viewed as manual). In other words, the danger still lurks. And if there’s danger lurking, we will continue to fearmonger and tell you to audit your payroll practices and identify any employees who may qualify as manual workers and ensure they’re being paid either weekly or semi-monthly on a regular payday.

Wishing all a meaningful Memorial Day as we remember and honor those who gave their lives in service to our country. Thank you for your sacrifice. Enjoy the long weekend (except the Indiana Pacers)! And as always, if you’ve got questions, you know we’ve got answers.

~ The W + K Team