New York’s “No Wage Theft Loophole Act”
On August 20, 2021, New York’s “No Wage Theft Loophole Act” was signed into law. The law amended Article 6 of the New York Labor Law. This landmark legislation was meant to clarify that Article 6 of New York's Labor Law “completely and without exception prohibits lack of distribution of earned wages,” and “[t]here is no exception to liability.”
New York Labor Law, Article 6
Article 6 governs payment of wages, and provides important wage theft protections to employees to allow them to recover from their employers. The Sections of Article 6 amended include Section 193 and Section 198.
Section 193 identifies deductions from wages authorized under the Labor Law, but also specifies that unless a deduction is authorized and for the employee’s benefit, it is prohibited.
Section 198 provides that, “[a]ll employees shall have the right to recover full wages, benefits and wage supplements and liquidated damages accrued during the six years previous to the commencing of such action[.]”
Why was the “No Wage Theft Loophole Act” Necessary?
The justification for the bill, as put forth by its sponsors, was chiefly that courts have misinterpreted Sections 193 and 198 by holding that employees cannot bring claims for prohibited deductions under Section 193 and 198 where an employer withholds all, rather than simply a portion - or a line item - of an employees wages. As the bill’s sponsors stated in their justification for the bill:
Section 193 of the Labor Law prohibits any deductions from wages unless the deduction is expressly authorized by the employee in writing and for his or her own benefit. While this language seems clear enough on its face to ward against any wage theft, much confusion has arisen over the term "deduction" and what this could possibly represent. For many of us, "deduction" calls to mind a literal notation on a paystub of wages subtracted, which leads to the question: what if the wage theft is not denoted by a line on a paystub? One can imagine a whole host of scenarios, for example, which clearly violate the intent of Section 193 without conforming to this narrow definition of a "deduction”...[A]n employer could withhold wages but simply fail to note the deduction on a paystub. Alternatively, an employer could deny the existence of the full amount of wages owed and claim that the employee's paycheck that month was a discretionary amount that the employer decided based on the quality of the employee's work. Or an employer could choose to withhold the pay entirely, as the statute simply prohibits "ANY" deduction. But does "any" mean "all"? What if the statute does not prohibit the withholding of an entire paycheck?
The “No Wage Theft Loophole Act”, addresses the judicial interpretations head-on, effectively shutting the loophole and making it so that no employer may escape liability for wage theft by adding that “[T]here is no exception to liability under this section for the unauthorized failure to pay wages, benefits or wage supplements” as new text, at Section 193, subdivision 5, and the last sentence of Section 198, subdivision 3.
What the “No Wage Theft Loophole Act” Means for You.
If you are the victim of wage theft by an employer in New York, in any court action in which the employee prevail, Section 198(1-a) provides that “the court shall allow such employee to recover the full amount of any underpayment, all reasonable attorney's fees, prejudgment interest as required under the civil practice law and rules, and, unless the employer proves a good faith basis to believe that its underpayment of wages was in compliance with the law, an additional amount as liquidated damages equal to one hundred percent of the total amount of the wages found to be due, except such liquidated damages may be up to three hundred percent of the total amount of the wages found to be due for a willful violation” of Section 194. The ability to recover attorney’s fees, or fee shifting, means that your employer becomes responsible for paying your legal fees if you prevail.
Section 194 prohibits employers from paying an employee less than an employee of the opposite sex for equal work requiring equal skill, effort and responsibility, and is performed under similar working conditions. However, employers may pay employeres differently based on a seniority system; a merit system; a system which measures earnings by quantity or quality of production; or a bona fide factor other than sex, such as education, training, or experience. While self-referential on its face, a bona-fide factor does not rest on a sex-based differential in compensation and is job-related, based on the particular position and consistent with business necessity.
How Much am I Entitled to Under the “No Wage Theft Loophole Act”?
Let’s look at some examples. Imagine that your employer unlawfully underpays you by $10,000 and you incur $7,000 in attorney’s fees. Under Section 198, should your suit prevail, you would be entitled to recover the following:
Amount underpaid: $10,000
Attorney’s Fees: $7,000
Liquidated Damages: $10,000
Total Recovery: $27,000
Imagine now that your employer again unlawfully underpays you by $10,000 and you incur $7,000 in attorney’s fees. In this example, however, your employer is found to have willfully violated Section 194, allowing recovery up to 300% of the wages found due.
Amount underpaid: $10,000
Attorney’s Fees: $7,000
Liquidated Damages: $30,000
Total Recovery: $47,000
It is important to note that the liquidated damages in the second example are not automatically awarded at 300%, but the full amount of liquidated damages is allowed under the statute.
How Long do I Have to Bring a Claim under the “No Wage Theft Loophole Act”?
The length of time you have to bring a wage theft claim is generally six years. It is important to note that if an employee files a complaint with the commissioner of labor of the state of NewYork, the six-year statute of limitations is tolled - or paused - from the date an employee files a complaint with the commissioner or the commissioner commences an investigation (whichever is earlier), until an order to comply issued by the commissioner becomes final, or where the commissioner does not issue an order, until the date on which the commissioner notifies the complainant that the investigation has concluded; at which time, the clock starts again. Filing a complaint with the commissioner does not stop you from bringing a lawsuit against the employer.
The statute of limitations is different when wage theft occurs in the construction industry. All new, renewed, modified, and amended construction contracts, beginning on January 4, 2022, are subject to a three-year statute of limitations against contractors, and a six-year statute of limitations against subcontractor-employers
