Over the last two decades, the Federal Judicial Center reports the number of wage-and-hour lawsuits filed nationally has spiked by 430 percent. In New York, the number is expected to climb even higher in response to a bill passed by the New York legislature in June 2014.
The measure, A08106C/S05885-B, was drafted for the purpose of bolstering the New York Wage Theft Prevention Act, as well as other provisions of the state’s labor law. The action does ease some requirements for employers, but it imposes heftier penalties for violations – particularly for repeat offenders – and allows for successor employer liability, something that didn’t before exist.
Because wage and hour theft law in New York has become increasingly complex, and the penalties for breaking the law ever more severe, it’s important that business leaders take the time to become educated about their obligations and potential consequences for violations.
The first place to start is with the Fair Labor Standards Act (also known as FLSA, codified in 29 U.S.C. 201) and the New York Labor Law. Both of these laws require employers to pay time and a half for hours worked in excess of 40 hours weekly to non-exempt workers. Failure to do so could result in a non-discretionary penalty of liquidated damages up to 100 percent the amount of the unpaid overtime wages. That means the principle balance owed to a prevailing worker in these cases is doubled, plus interest, plus attorney’s fees.
The recent case of Davila v. Menendez , before the U.S. Court of Appeals for the Eleventh Circuit, underscored the serious penalties that can be imposed. The appellate panel reversed a summary judgment finding in favor of the defendant in an alleged willful FLSA violation. There was no dispute a violation had occurred, but the question was whether it was intentional. The court ruled such a question was one for a jury to decide. If a jury does find a violation is intentional, liquidated damages are mandated. Even if the employer’s violation was found to be non-willful, the question of liquidated damages would be a matter left to the district court’s discretion.
FLSA provides a two-year “look-back” period on these claims, which is increased to three years if the violation is deemed “willful.” That means workers have three years from the time of the last violation in which to file. Further, New York’s labor statutes allow for an additional three years, meaning in this state there is a full six-year statute of limitations on wage-and-hour violation claims.
Even seemingly small infractions on the part of an ill-advised or unwary employer can result in significant liability. Overtime violations for a minimum-wage worker can quickly snowball into a lawsuit that costs an employer well over $100,000.
It’s worth noting too many of these actions involve more than a single employee (referred to as “collective actions”). This is where past and current workers who may have been affected receive notice of the alleged violation, and are allowed to opt into the lawsuit, without having to retain their own separate counsel. These cases can escalate rapidly, resulting in liability that can may exceed $1 million.
Originally, the Wage Theft Prevention Act passed in 2010 for the purpose of reducing wage payment abuse, largely by reducing the problem of misclassification of workers as exempt from overtime pay. It required all employers to submit annual wage-related information to workers, and this information had to be supplied to all new employees as well.
Legislators determined this requirement was cumbersome and didn’t further the purpose of the law, so the annual notice requirement has been withdrawn. However, employees still have to supply new workers with the information, which includes the employee’s pay rate, entitlement to overtime (or exempt status), the rate of overtime pay, the regular pay day date, and whether an employer intends to claim an allowance.
Employers who fail to provide such notice to new workers may have to pay $50-a-day, up to $5,000 – to new workers who didn’t receive notice within the statutory 10-day period. This penalty is double what it used to be.
Companies may be able to avoid sanctions for failing to provide notices if they can prove it made timely and complete payment of all wages to affected workers and that administrators reasonably believed, in good faith, that it was not required to provide the notice. However, pleading ignorance to the law is getting tougher and tougher.
The new law also provides for successor employer liability, which means a company similar in operation and ownership to one that previously committed labor law violations will be held accountable for the liabilities of its predecessor. The goal is to prevent companies from restructuring operations or dissolving one entity to create another for the purpose of avoiding wage-related liability claims.
Additionally, the law allows for personal liability of certain LLC members for wage violations. Under this provision, the 10 members with the largest ownership interest can be compelled to pay unpaid wages.
And finally, the new bill doubles the maximum penalty – from $10,000 to $20,000 – for companies that commitd more than one labor law violation over the course of six years.
Given the ongoing crackdown on labor law violations, New York businesses simply cannot afford to commit them – willfully or otherwise.
The Law Offices of Ira S. Newman provides employment litigation representation in New York City, Long Island, Great Neck and throughout the area. Call 516-487-7375 or send us an e-mail.
Wages and Hours: Frequently Asked Questions, Labor Standards, New York State Department of Labor
More Blog Entries:
Report: 2014 Ripe for New York Wage-and-Hour Lawsuits, Jan. 12, 2014, New York Labor Law Attorney