Coverage of Remote Employees Under NYS Human Rights Law

Earlier this month, the Second Circuit dismissed claims of discrimination under the New York State Human Rights Law (“NYSHRL”), concluding that occasional work by an otherwise remote-work employee within New York State is insufficient to render New York “the place where the impact of the alleged discriminatory conduct is felt” for purposes of coverage under the NYSHRL.  This decision highlights that some remote work from a New York location alone is unlikely to be enough to trigger coverage under the NYSHRL. Nonetheless, the risk and possibility of a claim exists, and thus all employers should be mindful of these jurisdictional issues when dealing with remote employees.

U.S. Supreme Court Confirms that a Job Transfer Could be Sufficient Adverse Action to Commence a Discrimination Lawsuit by the Transferred Employee

Recently, the United States Supreme Court clarified the standard under which a plaintiff can proceed with a claim for a discriminatory job transfer under Title VII of the Civil Rights Act of 1964 (“Title VII”), holding that a plaintiff need only show that the job transfer brought about “some” harm with respect to a term or condition of employment. That harm, however, need not be significant in order for the lawsuit to proceed.   

In the case at issue before the Supreme Court, the plaintiff, Sergeant Jatonya Clayborn Muldrow, worked as a plainclothes officer in the Intelligence Division of the St. Louis Police Department from 2008 through 2017 until she was reassigned to a uniformed job elsewhere in the Department and replaced with a male officer. Although Muldrow’s rank and pay remained the same, her responsibilities, perks, and schedule did not. Muldrow no longer worked with the high-ranking officials in the Department’s Intelligence Division—instead supervising the day-to-day activities of neighborhood patrol officers—and she lost access to an unmarked take-home vehicle and had a less regular schedule involving weekend shifts. Muldrow brought suit under Title VII, challenging the transfer as a discriminatory action based on her sex.

The Supreme Court held that, to make out a Title VII discrimination claim, a transferee must show some harm with respect to an identifiable term or condition of employment, but what the transferee does not have to show is that the harm incurred was “significant” or otherwise exceeded some heightened bar.

The Court’s ruling reaffirms that job transfers that – even arguably – lower the terms and conditions of an employee’s work environment (as subjective as that standard may be) could be the basis of a discrimination claim.  Employers making employment decisions should always be mindful that it’s not just termination but other employment actions that expose them to an employment lawsuit as well.   

Federal Overtime Rule on its Way to Finalization

The White House Office of Information and Regulatory Affairs (OIRA) completed its review of the updated federal overtime rule on April 10, 2024. Publication of the final rule in the Federal Register is expected any day now, with an effective date likely 60 days after publication.

If the final rule tracks the DOL’s proposed, then the final regulation will increase the minimum salary for exemption for executive, administrative, or professional (“EAP”) employees from $684 per week ($35,568 annualized) to $1,059 per week ($55,068 annualized) and the minimum total annual compensation level for exemption as a “highly compensated employee”—e.g., one who customarily and regularly performs any one or more of the exempt duties or responsibilities of an EAP employee—from $107,432 to $143,988. In addition, if finalized as proposed, the rule would require automatic increases in those thresholds every 3 years.

Other than in states with already-higher minimum salaries for exemption (which include New York for executive and administrative employees, but not professionals) –and absent a successful legal challenge to the new rule–employers will be required to pay most executive, administrative, and professional employees at least $1,059 per week.  Once these rules are finalized, please be sure to check with your payroll provider (such as Forework!) that they are updating the minimum salary requirements for your exempt employees. Failure to do so could result in the loss of the exemption, which would mean that the business would need to pay overtime to those employees it thought were exempt from overtime.

Employment Law Changes from this Year’s NY Budget

The New York State Budget was finally concluded on April 20, after 6 extensions. The Budget brings about some important changes to employment laws.

1.NY Finally Sunsets the COVID Sick Pay Law, but not Until July 2025

    The Budget includes a measure to repeal New York’s COVID-19 related sick leave requirements. As our readers know, since 2020, New York employers have been required to provide paid time off for employees who are under a mandatory quarantine or isolation order due to COVID-19. This leave obligation will end on July 31, 2025, not on July 31, 2024, as had been originally proposed.  Employers need to follow the CDC guidelines and, as applicable, the DOH guidelines about when mandatory quarantine or isolation is required (and, thus, pay obligations apply). 

    2.Prenatal Leave for Pregnant Employees

    Effective January 1, 2025, employers will be required to provide employees with 20 hours of paid prenatal leave each year. This leave can be taken during pregnancy or for related medical appointments, procedures, tests, and discussions with healthcare providers. This leave is separate from the existing 40 or 56 hours of paid sick leave (depending on employer size) mandated by state law and can be used in hourly increments. Employees must receive their regular rate of pay when using this leave.  

    3.Paid Leave for Nursing Mothers

    Starting on June 19, 2024, nursing mothers will have the right to paid break time to express breast milk during the workday, receiving 30-minute breaks for this purpose.  Currently, New York law grants employees reasonable unpaid break time for this purpose, at least every 3 hours or as otherwise reasonably requested by the employee.  The law goes further to ensure paid leave during these 30-minute breaks, but it is not clear how many paid 30-minute breaks per workday must be granted.  The law does clearly state that employees can utilize existing paid break time or mealtime for any period exceeding 30 minutes.

    Some important employment proposals did NOT make it into the final budget:

    1.No Limit on Liquidated Damages for “Frequency of Pay” Violations

          Initial budget proposals aimed to eliminate liquidated damages for late wage payments to manual workers. As we have previously written about in Forework’s newsletters, in 2019, an appellate court ruling affirmed a worker’s right to sue and recover approximately half their wages as liquidated damages under the labor law. This decision led to a surge of individual and class-action lawsuits, exposing employers to significant financial risks for alleged untimely payment when manual workers were paid bi-weekly or semi-monthly. In a separate case earlier this year, a different appellate court rejected a private right for workers to sue for such claims. Governor Hochul introduced legislation within the state budget to eliminate liquidated damages if employees were paid at least semi-monthly. However, lawmakers rejected this proposal.

          2.Seizure of Employer Assets by the NY DOL

          The initial budget would have given the New York Department of Labor the ability to seize employer assets to satisfy wage debts owed to employees for certain violations of wage payment regulations. This measure did not make it into the final budget.

          3.Increasing Disability Protections and Benefits

          Currently, New York employees are eligible to receive statutory short-term disability benefits when they are unable to work due to a non-work-related illness or injury. These benefits offer only wage replacement without guaranteeing any leave from work (but remember that employees may be eligible for leave protections under law such as the FMLA or ADA). The wage replacement benefits cap at $170 per week, a figure that has been in place for 35 years. Initial budget proposals would have provided job protected leave for DBL and increased this wage replacement amount from $170.  Neither measure was ultimately implemented in the final law.   

          Artificial Intelligence Continues Getting the Regulators’ Attention

          Employers who rely on artificial intelligence driven tools for their recruiting and hiring processes may face new regulations in New York. A bill (A. 9314) proposed in the New York Assembly on February 28, 2024, would impose requirements on employers who use artificial employment decision tools (“AEDTs”) in hiring processes. This bill targets tools used for screening and hiring applicants and would make it an unlawful employment practice for employers to screen applicants with an AEDT for jobs “within the state,” unless the AEDT was subject to a disparate impact analysis in the past year.

          The bill defines AEDT as “any system used to filter employment candidates or prospective candidates for hire in a way that establishes a preferred candidate or candidates without relying on candidate-specific assessment by individual decision-makers.” While the bill explicitly states that the disparate impact analysis would not need to be publicly filed and would be “subject to all applicable privileges,” it does require that prior to the implementation of an AEDT, employers would need to post a “summary of the most recent disparate impact analysis” and “the distribution date of the tool” on its website.

          Employers would also be required to provide the state’s Department of Labor with this summary on an annual basis. The proposed law does not provide for civil monetary penalties for employer violations. Rather, the state’s Attorney General or Department of Labor Commissioner would be able to initiate investigation into possible violations and could bring actions in court to correct alleged violations. If enacted, the bill would go into immediate effect.

          Deadline for ERC Voluntary Disclosure Program: March 22, 2024

          March 22nd is the deadline for taxpayers to apply for the Employee Retention Credit Voluntary Disclosure Program (VDP). The IRS has provided the opportunity for employers who received the credit but who later determined that they were ineligible for the ERC to voluntarily repay the credit at 80% of the credit received.

          The benefits and requirements of the program are:
          • Voluntary repayment of 80% of the credit received (versus 100%), without interest, and the 20% of relief received and kept would not be considered taxable income to the self-disclosing employer.
          • The IRS will not assess penalties or interest on the ERC payment if the 80% is paid in full by the time the closing agreement is signed.
          • Further, under this program, the employment tax return (941) won’t be examined for the ERC for the tax periods reported through the VDP.
          Other items on the return are still subject to examination.

          Entities who are currently under examination or criminal investigation by the IRS are not eligible for the VDP.

          The VPD is for companies who have already received the ERC. If a company has filed an ERC and it has not been processed, and the company believes they are not eligible, a Form 941-X to adjust the claim should be submitted to the IRS.

          New Domestic Worker Bill of Rights Obligations Announced in NYC

          A new New York City Law requires domestic worker employers in New York City to provide and post a domestic worker “rights poster” by July 1, 2024.  The workers’ bill of rights poster, which is now live on the City’s website, contains information on workers’ rights and protections under federal, state, and local laws that apply to all workers in New York City, regardless of immigration status.  Beginning July 1, 2024, New York City employers must provide copies of the workers’ bill of rights to all employees, and to new employees upon hire. Employers must also post the workers’ bill of rights in in the workplace and on the employer’s intranet and mobile application, if applicable.

          Employers must post and distribute this notice in English as well as any language spoken as a primary language by at least five percent of the employer’s workforce, if the notice is available in that language. Currently, the workers’ bill of rights is available for translation in 133 languages.

          First violations of Local Law 161 will be granted a 30-day grace period to cure, and subsequent violations are subject to a $500 civil penalty.

          New York City employers should take steps to comply with the notice and posting requirements of Local Law 161 by the July 1, 2024 deadline. Employers should also review the workers’ bill of rights to ensure ongoing compliance with all legal obligations and protections listed on the notice.

          New York’s Convenience of the Employer Rule…. not so Convenient

          Since May of 2006, New York has had a remote worker tax, also known as the “Convenience of the Employer” rule. This tax has been under “attack” over the past several years as New York has experienced a significant exodus of workers who have moved to live and work remotely in other states. 

          The New York remote worker tax requires workers to pay income taxes to New York State if their job is based in New York; even though they may work remotely outside of state lines. This rule is called the “Convenience of the Employer” rule because workers must still pay the tax if they are working outside of State lines due to their own “convenience,” not because the employer assigned them to work outside of the State.

          For years, states like Connecticut and New Jersey have credited their residents’ payments of the New York remote worker tax, in an effort to avoid double taxation. However, since COVID-19, these credit refunds have mounted to significant amounts of potentially lost revenue for states like New Jersey.  So, last year, New Jersey passed Bill A4694, incentivizing their residents to challenge the New York remote worker tax.  Connecticut is looking to pass a similar bill in 2024, offering a 50% credit on whatever their residents owe in Connecticut state income tax, if they can successfully challenge New York over their remote worker tax. A successful challenge would reverse a Connecticut resident’s New York tax obligations, while cutting their Connecticut tax obligations in half, simultaneously.

          Employers should be cognizant of these payroll tax obligations for their remote workers. Please speak to your Forework representative if you have remote employees and are not sure how to tax them.

          NY Employers Might Soon Get a Break on Pay Frequency Regulations

          A recent decision from the Second Department Appellate Division has created a split in New York Courts’ holding as to the question of how much an employer is liability to an employee when that employee is paid late (correctly, but late).  A First Department decision from 2019 basically stated that even though employers may pay their employees correctly, the Labor Law allows an employee to collect liquidated damages in the amount of the total amount that was due to the employee.  In other words, according to this 2019 court decision, if an employer fails to pay a New York employee $100 in wages on time, the employer actually owes the employee $200.  See Vega v. CM & Assoc. Constr. Mgt., LLC for the full decision.  Vega unleashed a storm of litigation against New York employers, with purported “manual worker” plaintiffs (such as home health aides) seeking liquidated damages in amounts equal to the late payments. The potential exposure in such cases for New York employers can be high, particularly when coupled with the NYLL’s six-year statute of limitations. Two major developments this week, however, suggest relief for employers is on the way.

          First, on Jan. 16, 2024, Gov. Kathy Hochul, in her annual executive budget proposal, offered an amendment to NYLL § 198 clarifying that liquidated damages are unavailable under § 191 provided the manual worker was paid “in accordance with the agreed terms of employment, but not less frequently than semi-monthly.”

          Second, on Jan. 17, 2024, the Supreme Court of the State of New York Appellate Division: Second Judicial Department (the Second Department) issued its highly anticipated decision in Besante Fitzgerald Grant et al. v. Global Aircraft Dispatch, Inc. The Second Department disagreed with the Vega holding and found that a late payment of all wages is not an “underpayment” of wages that triggers a right to liquidated damages under Section 198; and (2) regardless, no private right of action exists for the claimed frequency of pay violation. 

          Unless the Governor’s proposal passes in the executive budget, this issue is headed to the Court of Appeals for a resolution, once and for all, due to the split in the First and Second Departments on this critical issue.  In the meantime, employers must ensure that they are paying workers on time, and correctly. 

          More Enforcement and Penalties for NYC Sick Time Noncompliance is on the Horizon

          As we had previously reported, the New York City Council passed a bill that creates a private right of action for individuals claiming violations of the NYC Earned Safe and Sick Time Act (“ESSTA”).  The Council presented the bill to Mayor Eric Adams on December 20, 2023, after which he had 30 days to either sign the bill into law, veto it, or take no action. Since Mayor Adams took no action within 30 days of receiving it, the bill became law and will take effect on March 20, 2024.

          Presently, the sole enforcement mechanism for alleged violations of the ESSA is to file a complaint with the NYC Department of Consumer and Worker Protection (“DCWP”). The DCWP is in turn required to investigate the claim and if it is determined that a violation has occurred, the claim goes before an administrative law judge for further proceedings.  Once the new law takes effect in March, claimants will still be able to file complaints with the DCWP, but they will also be able to bring a civil action for alleged violations of ESSTA in any court of competent jurisdiction.  Claimants will have two years from the date they knew or should have known about the alleged violation to bring an action.

          Where an individual has both filed a complaint with the DCWP and commenced a civil action against their employer for the same alleged violation, DCWP will stay their investigation of the alleged violation until it receives notice that the civil action is withdrawn or dismissed without prejudice. If DCWP receives notice of a final judgment or settlement, the agency will dismiss the complaint unless it determines that the violation was not resolved by such judgment or settlement. The individual must notify DCWP within 30 days of the date that the time for any appeal has lapsed that such complaint is withdrawn, dismissed without prejudice, or resolved by final judgment or settlement.

          In addition to compensatory damages already provided for under the ESSTA, the new amendment will allow individuals to seek injunctive and declaratory relief, attorney’s fees and costs, and other relief that the court deems appropriate.

          Lastly, the amendment expands ESSTA’s civil penalty provisions for entities found to be in violation of the law’s provisions regarding the accrual and use of sick or safe time or retaliation to be imposed “on a per employee and per instance basis.”

          Employers covered by ESSTA should ensure that they are staying on top of compliance with ESSTA as the consequences for failing to do so are about to significantly increase.