New York Adds New Teeth to Wage and Hour Enforcement

Employers have been experiencing a new wave of wage and hour lawsuits with significant six and seven figure recoveries and, in some cases, liability for managers who are responsible for failures to pay the wages required by the federal Fair Labor Standards Act ("FLSA") and state wage and hour laws. At the same time, state legislatures have been amending the laws to increase protection for employees.

Governor David A. Paterson announced on August 27, 2009 that he had signed a bill (A. 6963) into law to enhance wage and whistleblower protections for workers. The new law takes effect on November 24, 2009. Following the national trend of expanding the rights of workers, New York's legislature stated that "strengthening the recovery of unpaid wages will also help the state and local economies." Further, "the penalty increases are estimated to generate $75,000 in state revenues."

The bill increases penalties against employers who retaliate against employees for exercising their rights under the New York State Labor Law. Minimum penalties are increased from $200 to $1,000, and maximum penalties are increased from $2,000 to $10,000.

The bill also provides that when an employer is found to have violated New York State Wage Laws, liquidated damages of 25 percent of the unpaid wages will automatically be added unless the employer proves a "good faith belief that the underpayment complied with the law." Under the prior law, liquidated damages were awarded only upon a finding that the employer's failure to pay the wage was "willful."

As a result, under the new law, liquidated damages can be awarded if the employer had not inquired about whether its wage system was in compliance with state law. Since New York State liability can go back as many as six years, liquidated damages can be significant indeed. This suggests that a periodic audit of pay practices is a wise course for employers to take to ensure they are in compliance with applicable laws and regulations and not vulnerable to class actions and administrative proceedings.

Section 1 of the bill amends New York Labor Law 198(1-a) to allow the Commissioner of Labor to bring either a court action or an administrative proceeding to collect wage underpayments and liquidated damages on behalf of workers.

Section 2 of the bill amends New York Labor Law 215(1) to expand the categories of conduct protected against employer retaliation. Significantly, the new state law now expressly prohibits retaliation when an employee has made a complaint to his or her supervisor. This expands whistleblower protection beyond the federal FLSA, which in the Second Circuit pursuant to Lambert v. Genesee Hospital, 10 F. 3d 46 (2d Cir. 1993), requires an employee to "file" a formal complaint before his or her conduct is protected from reprisal.

In light of this new law particularly, and the prevailing national climate generally, employers now must redouble internal efforts to verify that their pay practices comply with applicable state and federal wage and hour requirements. Even though a pay practice has prevailed in an industry for decades without challenge, the practice still could be challenged today or tomorrow and found to be in violation of laws passed recently or over 70 years ago.

When employees are disciplined, it is vital to document the reasons for the discipline. A contemporaneously written explanation for imposing legitimate discipline is the best defense to a claim of retaliation.

Questions about pay practices and discipline are best brought to the attention of experienced employment counsel to prevent inadvertent and costly mistakes.

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