NY Wage Theft Prevention Act Amendments Target Dishonest Employers

On December 29, 2014, New York Governor Andrew Cuomo signed legislation amending the New York Labor law. The bill includes several amendments to the 2010 Wage Theft Prevention Act. Most of the new amendments go into effect on February 27, 2015.

Here are a few of the effects of the new law:

Reduces Written Notification to Some Workers

The legislation reduces the Wage Theft Prevention Act worker notification of pay rate requirements. Since 2011, employers have been required to provide their employees with wage rate notification statements at the time of hire, and on an annual basis. Workers in the hospitality industry must also receive written notice when their pay rate changes.

Since the law went into effect, employers have complained that the annual notice requirement was burdensome.

The new amendment removes the annual notice requirement, but keeps the other notification requirements in place.

Increases Penalties and Exposure for Labor Law Non-Compliance

First, damages for failure to comply with the remaining notice requirements have increased. If an employer fails to provide the required notice within ten days of an employee’s date of hire, the employer can be liable for up $50 per day to a maximum of $5,000 per violation. Previously, the cap in civil cases was only $2,500 and accrued at a rate of $50 per week.

Second, damages for failure to provide pay stubs in compliance with the WTPA have increased from $100 to $250 per violation and the cap on such damages has increased from $2,500 to $5,000.

Third, recidivist wage thieves are subject to increased penalties. Employers with a wage theft violation in the last six years could be subject to an additional $20,000 penalty.

Fourth, contractors and subcontractrors will be required to disclose their wage violations to their employees by providing them with an attachment in their paychecks summarizing the violations. This will likely help workers determine if they are part of a larger group of workers being cheated in the same way. 

Cracks Down on the Corporate Shell Game

Several provisions of the new law target employers’ use of corporate entities to insulate themselves from liability for wage theft.

First, the new law closes the LLC loophole. New York law previously provided that the top ten shareholders of a closely-held corporation can be held personally liable for the company’s acts of wage theft.  Wage thieves easily avoided liability under this statute by forming a limited liability company to operate the business instead of a corporation.

Under the new law, members of a limited liability company with the ten largest percentage interests may be personally liable for the LLC’s wage theft. This provision removes the advantage of forming an LLC for the purpose of escaping personal liability for wage theft.

Second, it will now be more difficult to simply restructure or rename the business in order to avoid liability. Under the new law, successor entities with the same employees, the same ownership and which are engaged in substantially the same operation will be liable for the acts of the predecessor entity.

Overall, we support the new changes, which should have the effect of reducing the administrative burden on honest employers, increasing the cost of committing wage theft and bringing the hammer down hard on repeat offenders.

Download attachments:

• Assembly Bill A8106-C