HR Management & Compliance

Wage Theft Prevention Act Increases Duties, Stiffens Penalties for New York Employers

by Traycee Ellen Klein and Erin Carney D’Angelo

On Monday, December 13, New York Governor David Patterson signed the Wage Theft Prevention Act (WTPA). According to the governor’s press release, the new law:

  • enacts more stringent and transparent record-keeping and employee notification requirements;
  • increases the amount of wages that can be recovered as damages in a suit for nonpayment over and above the lost wages themselves — from 25 percent to 100 percent, the amount allowable under federal law;
  • creates stronger collection tools;
  • raises criminal penalties for failure to pay minimum wage to up to a year in prison and a $5,000 fine; and
  • strengthens protections for whistleblowers in cases involving wage violations.

Additional Notice and Record-Keeping Requirements
Employers need to start planning now to ensure their hiring and payroll practices are in compliance with the WTPA’s new notice and record-keeping requirements by April 12, 2011.

On the preemployment notice of wages, you must state your intent to claim allowances (such as tip or meal allowances) as part of the minimum wage, list the basis of the wage payment (i.e., whether paying by hour, shift, day, week, piece, etc.), and provide additional information about the organization, including any “doing business as” names. This is in addition to the information you’re already required to provide to employees by the New York Labor Law, Article 6, Section 195.

The WTPA also requires you to:

  • provide the notice upon hire and by February 1 of each following year;
  • provide notice to the employee in both English and the language identified by the employee as her primary language;
  • have the employee affirm that she accurately identified her primary language and that the notice was provided in that language;
  • maintain the acknowledgment of the notice for six years; and
  • notify employees of any change in the notice at least seven days before it takes effect, unless the change is reflected on the employee’s pay stubs.

In connection with the notice required above, the WTPA calls on the New York Department of Labor (NYDOL) to develop dual-language templates to assist employers in complying with the notice requirements.

It’s anticipated that the templates, when developed, will be posted on the NYDOL’s website. Employers will be deemed to be in compliance with the requirement that they provide the notice in the employee’s primary language if the primary language is a language for which a template is not available from the agency and the employer provides the notice in English.

In connection with the record-keeping requirements, the WTPA increases the length of time you must maintain payroll records from three to six years.

Keep up with the latest developments in state laws with the Employers State Law Alert

Enhanced Civil and Criminal Penalties
The WTPA is intended to make it easier to hold employers liable for wage-law violations and increase the penalties for noncompliance.

Civil Penalties for Noncompliance. If an employer fails to provide the preemployment notice of wages containing all of the required information within 10 days of the first day of employment, the WTPA provides for (1) damages in the amount of $50 for each workweek the violation occurs or continues to occur (not to exceed $2,500), (2) costs and reasonable attorneys’ fees, and (3) a private right of action.

For employers that fail to pay the proper amount of wages, the WTPA provides for:

  • liquidated damages in the amount of 100 percent of wages owed, an increase from 25 percent;
  • additional assessment of damages for willful or egregious violations;
  • an additional 15 percent in liquidated damages if the employer defaults on paying a final judgment for more than 90 days;
  • recovery of prejudgment interest; and
  • recovery of attorneys’ fees.

Criminal Penalties for Nonpayment of Wages. Employers that fail to pay the proper amount of wages also could be subject to criminal penalties in the form of fines and imprisonment, with the second violation a felony. The WTPA expands criminal liability to partnerships and limited liability companies, and their officers and agents who knowingly permit the nonpayment of wages, in addition to corporations. Currently, the criminal penalties of the labor law apply only to corporations and their officers and agents.

Learn more about wage and hour law with the Wage and Hour Manual

Additional Protection from Retaliation
The WTPA also enhances the protections for workers who are retaliated against for asserting their rights with respect to their wages. These enhanced protections include:

  • protection from retaliation by individuals who aren’t technically “employers,” provided the employee can prove that the person retaliated because the employee engaged in the protected conduct;
  • statutory damages not to exceed $10,000, in addition to compensatory damages;
  • injunctive relief such as ordering a rehiring or reinstatement of the employee to a former or equivalent position or front pay in lieu of reinstatement; and
  • tolling of the two-year statute of limitations for a court action if the employee files a complaint with the Commissioner of Labor.

Read about the latest developments in New York employment laws and regulations in the New York Employment Letter

Enhanced Authority for Commissioner of Labor
The WTPA also gives the Commissioner of Labor new powers that will make it easier to collect damages from employers that violate the law. The Act allows the commissioner to (1) require an employer that defaults on an administrative order to provide an accounting of all assets and post a bond and (2) institute administrative actions (as opposed to a civil judicial action) to recover penalties and collect claims.

Take-Away for Employers
The WTPA, which takes effect in April, imposes additional notice and record-keeping obligations on employers and significantly enhances the penalties for noncompliance.

For these reasons, it’s imperative that you not only review your policies and practices in connection with the preemployment notice of wages and record keeping but also conduct audits to ensure your wage and hour practices are in compliance with federal and New York state law.

That includes reviewing your payroll practices to ensure compliance with laws governing minimum wage, overtime, deductions, timing of pay, tip credits, tip pooling, and breaks. Planning ahead is the best way to avoid potential significant penalties.

For legal advice about the new law and compliance requirements, contact Traycee Ellen Klein at (212) 351-4812 or Erin Carney D’Angelo at (212) 351-4508. Both are attorneys with Epstein, Becker & Green, P.C., in New York City. To read a previous article about the new law, check out the October 2010 issue of New York Employment Law Letter, p. 5: “Crackdown on wage theft: If you don’t pay the time, you might be committing a crime.”

Learn how recent court decisions and new laws like the Wage Theft Prevention Act are having a big impact on employers in New York during an HR Hero audio seminar on the “Do’s and Don’ts of Operating in New York in 2011.” Michael Kalish and Carrie Corcoran, attorneys with Epstein, Becker & Green, P.C., in New York City, will present the 90-minute event on January 11, 2011.