Century-old New York State weekly pay law sparking a contentious legal battle

ALBANY — A below the radar but costly battle is being fought in more than 400 cases in courtrooms across the state between business owners and workers over just how faithful New York should be to a century-old law about weekly paychecks.

The law, which has roots in the Industrial Revolution era, aims to protect manual laborers by requiring businesses to pay workers weekly.

In 2019, a midlevel state court decision opened the door for certain manual laborers to sue their employers for monetary damages if they were paid biweekly, creating an explosion of lawsuits costing businesses hundreds of thousands, and in some cases millions, of dollars.

Workers' rights advocates and unions say the law protects vulnerable laborers, particularly those earning minimum wage who live paycheck to paycheck.

“Biweekly pay harms low-wage employees,” said Molly Brooks, a Manhattan-based partner at Outten & Golden LLP, which represents workers in wage cases. “These employees frequently need immediate access to their wages for basic necessities: food, medical care, rent and child care.”

Business groups say employers, particularly small businesses, shouldn’t have to pay damages because no wages were stolen. Their attempts to get Gov. Kathy Hochul and state lawmakers to change the law have been stymied by unions and trial attorneys. 

“Employees have been paid for every hour they have worked. They were just paid biweekly or semimonthly,” said Ashley Ranslow, New York State director for the National Federation of Independent Business, which represents 11,000 small businesses in the state.

Adding another wrinkle, a separate state appellate court in January released an opposing decision saying businesses don’t have to pay damages if they were paying the workers, albeit not weekly.

Proposed legislation aimed at clarifying the matter failed to make it through the state legislative process before the session ended earlier this month. 

Instead, the fight will probably move up to the state’s highest court.

But it’s more than a legal battle for people such as Center Moriches residents Michelle Robey, 54, and her sister Patricia Demint, 53, whose entrepreneurial plans were upended by the 2019 decision.

The sisters opened a Dairy Queen in Medford in 2017, fulfilling Demint’s lifelong dream. They were sued in June 2020 for paying their workers biweekly instead of weekly and now owe $450,000 in damages.

“We were just so happy that we could help her achieve this dream and now it’s just a complete nightmare,” Robey told Newsday. “We didn’t steal from anybody. We paid everybody every dime they were owed.”

Robey, whose business employs about 40 people, said she looked up the pay rules when they started their business and she and her accountant believed the law clearly referred to employees such as construction workers, not food service workers. “It was very ambiguous,” she said.

Worker protections

State law in 1890 required weekly pay for certain employees, including railroad, manufacturing and mining workers, according to historic documents. The current version of the pay frequency law was put in place in 1966, according to the state Department of Labor.

The law has been interpreted to mean individuals who spend more than 25% of working time engaged in “physical labor,” which includes “countless physical tasks performed by employees,” according to the labor department.

Employers found in violation are ordered to comply and can face penalties and fines for not doing so. Large businesses with an average of 1,000 workers in the state that meet certain criteria can apply for a waiver to pay their workers less frequently. 

Weekly pay, especially for workers who get paid hourly and earn minimum wage, is critical for paying for the basic necessities, Brooks told Newsday.

There has been a rise in payday lending, with workers getting a loan on their biweekly paychecks, indicating that the pay frequency of two weeks is not enough, she said. “Cash flow needs require that influx of pay every single week,” Brooks said.

Business groups say the definition of manual worker is too broad. “Virtually anybody is a manual worker,” Ranslow said. 

The department needs to “clearly identify what manual labor is,” said Sen. Dean Murray (R-East Patchogue), who sponsored a bill that would exclude businesses that paid their workers within a certain time frame from having to pay damages. 

Dueling decisions 

In 2019, justices of the state's midlevel appellate court in Manhattan ruled that construction worker Irma Vega had a right to sue her employer for “liquidated damages” for being paid biweekly instead of weekly.

Liquidated damages by law include up to 100% of the total amount of wages found to be due going back up to six years, as well as attorney’s fees.

This was the first time an appellate court said workers could bring private lawsuits for not being paid weekly, Brooks said.

“Suddenly it exploded with court cases and law firms suddenly finding potential clients to sue businesses when they were not paying someone weekly,” Paul Zuber, executive vice president of the Business Council of New York State, told Newsday.

The cases can be very lucrative, and some law firms have advertised online to get workers interested in filing class action lawsuits.

More than 400 lawsuits have been filed by workers against various types and sizes of businesses, including Walmart, Walgreens, Five Guys and Target.

Businesses in these cases typically have settled rather than run the risk of losing in court, Ranslow said.

“At the end of the day, the people that are really getting hurt are small- to mid-size companies,” Zuber said.

“That’s someone’s livelihood,” he said, adding that some businesses may close as a result of these lawsuits.

Then, in January, a state appellate court in Brooklyn rendered an opposing decision, throwing the issue into question.

The court, in a case involving the Queens-based Global Aircraft Dispatch Inc., ruled that biweekly payment of wages doesn’t constitute nonpayment or underpayment of wages under the law.

Looking ahead 

The Global Aircraft case is most likely to go before the state’s highest court, the Court of Appeals, experts said.

The federal courts in the vast majority of the cases before them have sided with the Vega decision when making their rulings, as they look to predict what the Court of Appeals will do, Brooks said.

Hochul in her executive budget proposal this year included language that would have eliminated liquidated damages where businesses had fully paid their employees at least semimonthly. 

The measure was blocked by unions and trial attorneys representing the workers, who say the damages are the leverage workers need. 

A similar bill proposed by Murray also failed to make it through the legislative process.

“Abolishing liquidated damages will remove the only meaningful means of enforcing pay frequency requirements for manual workers who need them most,” Mario Cilento, president of the New York State AFL-CIO trade union, said in an emailed statement.

The Dairy Queen sisters, in lieu of action from lawmakers or the Court of Appeals, decided to settle what became a class-action lawsuit against them rather than face paying millions of dollars, Robey said. They cashed in their retirement funds to make the first payment toward the $450,000 they owe.

“Now we have to make $75,000 payments every six months for the next two years, and we’re just not sure where we’re getting that money from,” Robey said.

The business is still open, but it’s not easy between the monetary and emotional costs, she said, adding, it’s “really been awful.”