Significant Developments for New York “Frequency of Pay” Litigation
Under New York Labor Law (NYLL), employers generally must pay “manual workers” on a weekly basis. Following a 2019 appellate-level court decision recognizing a private right of action for violations of this requirement, numerous class action lawsuits have been filed by employees and former employees claiming damages for “late paid” wages – i.e., for wages that were paid in full but paid on a bi-weekly or other non-weekly basis.
There have been two important recent developments concerning such claims: (1) a new appellate decision (from a coordinate branch of the court system) repudiating a private right of action, and (2) proposed legislation from Governor Hochul that would eliminate a key damages remedy for violations of the pay frequency law.
Background on Section 191 and the Right to Sue
NYLL § 191(1)(a) provides that “a manual worker shall be paid weekly and not later than seven calendar days after the end of the work week in which the wages are earned.” (Certain exceptions are made under the law – e.g., for non-profit entities, employers with 1,000 or more employees, and employers who receive authorization from the State.)
NYLL defines a “manual worker” as a “mechanic, workingman, or laborer,” and this term has been interpreted broadly. The New York State Department of Labor has instructed that employees are manual workers if they spend more than 25% of their working time handling physical tasks, and that bartenders, hairdressers, restaurant employees, and cashiers, e.g., may qualify. Courts have applied similar interpretations.
In the 2019 case of Vega v. CM & Associates Construction Management, LLC, New York’s Appellate Division, First Department – which covers Manhattan and the Bronx – rather unexpectedly held that a private right of action exists for § 191 violations. That meant that manual workers did not have to rely on the New York State Department of Labor to enforce the law, with civil penalties; now they could directly sue their employers or former employers. And under the court’s holding, a manual worker who was paid wages “late” could now seek “liquidated damages” from the employer, meaning that the plaintiff could be awarded the full amount of the first week of late-paid wages under a non-weekly pay period, and not just interest amounts corresponding to the time value of delays in getting paid.
This decision opened the floodgates to frequency of pay lawsuits, often filed as class actions and in federal court, and has meant significant potential exposure for non-compliant employers.
As described below, however, the flood could be receding.
The Second Department’s Contrary Holding
In mid-January 2024, the Appellate Division, Second Department – which covers Kings, Queens, Dutchess, Nassau, Orange, Putnam, Richmond, Rockland, Suffolk, and Westchester counties – rejected the Vega court’s reasoning, creating a split in New York law.
Specifically, in Grant v. Global Aircraft Dispatch, Inc., the Second Department held that NYLL did not expressly or implicitly establish a private right of action to recover liquidated damages in frequency of pay cases. The Grant court said that the full payment of wages to a manual worker on a regular biweekly schedule, even if technically untimely under NYLL, could not constitute any “nonpayment or underpayment” of wages; that NYLL was designed to address nonpayment and underpayment, “as distinct from the frequency of payment”; and that, as a result, liquidated damages could not be had in the case.
Governor Hochul’s Proposed Legislation
Also in mid-January 2024, the Governor’s office unveiled its Executive Budget Proposal for fiscal year 2025. That Proposal directly targets frequency of pay litigation and the Vega decision by including a proposed amendment to NYLL. If enacted, this amendment would provide that “liquidated damages shall not be applicable to violations of [§ 191] where the employee was paid in accordance with the agreed terms of employment, but not less frequently than semi-monthly.”
As noted, the Governor’s amendment will remain a mere proposal until (potentially) adopted by the New York State Legislature. It is difficult to predict how the proposed legislation will fare. Pro-employee sentiment in Albany could undermine it completely, or a compromise bill could pass.
There is currently a split in New York law on the right to sue and seek liquidated damages for late paid wages. Claims brought in the First Department are still subject to Vega (i.e., permissible), whereas claims brought in the Second Department are now subject to Grant (i.e., impermissible). Federal courts applying New York law are now left with even greater uncertainty as to what that law means.
This conflict and uncertainty can only be resolved definitively by New York’s Court of Appeals or legislative enactment. Until then, employers evaluating potential damages liability under § 191 should err on the side of caution.
This article is intended as a general discussion of these issues only and is not to be considered legal advice or relied upon. For more information, please contact RPJ Attorney Gregory Feit who counsels clients on employment law, litigation, arbitration, negotiation, and trial advocacy. Mr. Feit served is admitted to practice in New York.