New York eases penalties for first-time violations of law that required paying workers weekly

ALBANY — Businesses that pay manual workers biweekly, violating New York’s century-old weekly pay law, will no longer be on the hook for hundreds of thousands of dollars in damages under provisions in the state budget that provide flexibility for first-time offenders.

The law, which has roots in the Industrial Revolution era, aims to protect manual laborers. But in 2019, a midlevel state court decision opened the door for certain manual laborers to sue their employers for "liquidated damages" if they were 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.

The decision opened the floodgates to hundreds of cases across the state, costing businesses anywhere from hundreds of thousands to millions of dollars and forcing some small businesses to close.

The $254 billion state budget passed this month included language championed by Gov. Kathy Hochul to limit the amount of damages employees who are paid in full on a biweekly basis are entitled to. 

For a first time violation, businesses will only be required to pay the interest the employee lost by not being paid weekly. Second violations would still be subject to full liquidated damages. The law applies to pending and future cases.

"Governor Hochul understands the burden on small businesses who were hit with these costly lawsuits, and wanted to ensure that workers are paid full wages in a timely manner," Hochul spokesperson Kassie White said in an emailed statement.

The change evoked concern from some worker advocates and attorneys who say manual workers have the right to not only be paid on time but to seek full damages if an employer violates the law.

"This amendment is just a slap in the face to New York workers," said Molly Brooks, a Manhattan-based partner at Outten & Golden LLP, which represents workers in wage cases.

Manual workers are some of the most vulnerable laborers, particularly those earning minimum wage who live paycheck to paycheck, Brooks told Newsday. "Gov. Hochul is telling everyone to come to New York and work here while at the same time she’s just stripping manual workers of the right to get paid on time."

Business groups applauded the move, saying the original law is not only ambiguous in how it defines manual laborers, but that businesses shouldn’t be so heavily penalized if they are fully paying their employees, just on a biweekly basis.

"This is a fair balance to ensure that employers were protected from egregious liquidated damages but workers are given some monetary relief for being paid a week late," said Ashley Ranslow, New York State director for the National Federation of Independent Business, which represents 11,000 small businesses in the state.

Need for clarification

State law in 1890 required weekly pay for certain employees, including railroad, manufacturing and mining workers. The current version of the pay frequency law was put in place in 1966 and has been interpreted to mean individuals who spend more than 25% of working time engaged in "physical labor," according to the labor department.

Employers found to be violating the law can face penalties and fines. 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.

Justices of the state's midlevel appellate court in Manhattan in 2019 ruled that construction worker Irma Vega had a right to sue her employer for "liquidated damages" for being paid biweekly instead of weekly. The case was the first time an appellate court said workers could bring private lawsuits for not being paid weekly, and lawsuits have since been filed by workers in industries including fast food and graphic design.

Because of the vagueness of the law, many businesses are unaware that their workers may be considered manual laborers, Paul Zuber, executive vice president of the Business Council of New York State, told Newsday. "In many instances a lot of these small businesses had to settle because it was easier than to go to court and potentially take a loss," he said.

Under the new law, the only businesses that would potentially be hurt would be those "systematically trying to avoid the law," Zuber said.

The budget may not mean cases go away, but "we anticipate much less of them being filed," said Howard Wexler, a partner at Manhattan-based Seyfarth Shaw LLP, who represents employers.

Brooks warned that the change could have a negative impact on employees trying to bring future cases because it significantly reduces the potential amount of damages, meaning attorneys may be hesitant to take the case. And if it’s difficult to get a first case, it will be even harder to prove a second violation, she said. It "takes the teeth out of the law and gives employers a green light not to pay on time."

Brooks also noted that many employees have pending cases where they were seeking full liquidated damages and now can only receive interest.

Sen. Dean Murray (R-East Patchogue) said he thought it was a "fair compromise," but more needs to be done to clarify the definition of manual laborer.

"The ambiguity of how it’s worded in the law kind of left the door open for a lot of confusion and a lot of attorneys took advantage of that with a lot of lawsuits," he said. "It really needs to be clarified."