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.

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.

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. 

On January 17, 2024, New York Governor Kathy Hochul released the proposed Executive Budget for fiscal year 2025. The Budget proposes a number of changes to New York’s employment laws.  Here is the summery of key proposals: 

Sunset of COVID-19 Paid Leave

The Budget includes a proposal that would bring an end to the requirement that employers provide mandatory paid sick time – above and beyond what is required under the New York State Paid Sick Leave Law – for employees who are under a mandatory order of quarantine or isolation because of COVID-19. If enacted, the amendment will sunset the requirement on July 31, 2024.

Expanding NYDOL Enforcement Power to Include Seizure of Employer Assets

The Budget further aims to expand recovery methods for violations of certain wage payment provisions under the Labor Law. The Budget proposes to give the New York Department of Labor (“NYDOL”) the ability to seize employer assets to satisfy wage debts owed by employers to employees.  The proposal would empower the Commissioner of Labor to directly execute a wage violation order that has been filed with the county clerk of the employer’s residence or place of business. The Commissioner would be empowered to issue a warrant to any officer or employee of the NYDOL who may then file the warrant with the appropriate county clerk. The Budget proposal grants the Commissioner (or the designated officer or employee of the NYDOL) the same power conferred upon sheriffs under the laws and rules of New York State to seize and sell the employer’s property for owed wages.

Alternatively, the Commissioner would be granted the power to directly issue a warrant to the sheriff of the employer’s county, commanding them to seize and sell real property of the employer-within that county. The sheriff would be responsible for filing this warrant with the appropriate county clerk and then executing the warrant.

Expanding Disability Leave Protections and Increasing Maximum Short-Term Disability Benefits 

Presently, covered New York employees are entitled to collect statutory short-term disability benefits due to a qualifying off-the-job illness or injury for a period of up to 26 weeks per 52-week period. The budget proposes to extend job protection to employees during a disability leave period and would further require continuation of existing health benefits during a disability leave in the same manner as is currently required under the NYS Paid Family Leave Program (the “NYPFL”).  This would effectively create a statewide paid “mini-FMLA” program whereby employees experiencing a period of disability may be entitled to up to 26 weeks of protected leave for such condition, upon timely return from which they would be entitled to be reinstated to their same or a comparable position, with comparable benefits, pay, and other terms and conditions of employment. The existing 26-week combined cap on receipt of disability and NYPFL benefits in a given 52 week period would continue under the proposal.

In addition, for the first time since 1989, the Budget proposes an increase to the maximum weekly benefit amount for statutory short-term disability benefits. The current maximum weekly benefit of $170 would be amended to instead eventually be tied to the Statewide Average Weekly Wage (“SAWW)” to keep pace with wage growth. The SAWW is based on the average weekly wage paid in New York State during the previous calendar year.

The increases would phase in and benefit amounts would be tiered depending on the length of a disability leave.  Beginning as of January 2025, the proposed benefit rate would increase to 50% of the employee’s average weekly wage (“AWW”) up to a weekly maximum of $400 per week for the first 12 weeks of a disability leave, and a rate of 50% of the employee’s AWW capped at $280 per week for the 12th through the 26th weeks of leave.  These amounts would increase annually through 2029, landing at a rate of 67% of an employee’s AWW up to a weekly maximum of 67% of the SAWW for the first 12 weeks of disability leave, and 67% of the employee’s AWW capped at $280 per week for the remaining weeks. Accordingly, the proposal would increase employee contributions toward disability benefits to one-half of 1% of the employee’s wages, not to exceed 40% of the average of the combination of all employee and employer contributions to disability benefits during the prior calendar year, as determined by the Superintendent of Financial Service.

Lactation Breaks

The Budget includes a proposal that would require paid breaks for breast milk expression in the workplace. Presently, employers are required to provide reasonable unpaid break time or permit an employee to use paid break or meal time to express breast milk during the workday. The proposal would require employers to provide paid lactation break time for up to twenty minutes and permit employees to use existing paid break or meal time for time needed in excess of twenty minutes.

Paid Leave for Prenatal Appointments

The Budget includes a proposal that would expand the New York State Paid Family Leave Law (“NYPFL”) to include partially paid leave for prenatal appointments. The NYPFL presently provides eligible employees with up to 12 weeks of partially paid leave for reasons that include caring for a covered family member with a serious health condition, bonding with a newly born or placed child, and certain reasons related to military exigency. The proposed amendment would expand the NYPFL to permit up to 40 hours of leave for eligible employees to attend prenatal appointments above and beyond the existing 12 weeks of leave currently available.

Eliminating Liquidated Damages for Some Pay Frequency Claims

As reported in another article in this Newsletter, the Budget includes proposed legislation precluding recovery of liquidated damages for violations of the Labor Law’s frequency of payment provisions. 

What’s Next?

While Governor Hochul is responsible for proposing a comprehensive budget, there is no guarantee that the proposed budget, in its current form, will be approved. The New York State Legislature will next review and possibly modify the budget before enaction. Upon approval, amendments will take effect on the sixtieth day after the budget is signed into law.

The New York City Council has passed a bill (Proposed Int. No. 563-A) that would create a private right of action to seek damages and other relief for violations of New York City’s Earned Safe and Sick Time Act (ESSTA). Unless Mayor Eric Adams vetoes the bill within 30 days, it will become a law and apply to all employers covered by ESSTA.

By way of background, ESSTA permits employees to use ESSTA leave for the care and treatment of sickness affecting themselves or a family member or to seek legal and social service assistance, or take other safety measures if the employee or a family member is a victim of an act or threatened act of domestic violence or unwanted sexual contact, stalking, or human trafficking. Currently, the law permits employees who claim a violation of their rights under ESSTA to file a complaint with the New York City Department of Consumer and Worker Protection (DCWP).

The recently proposed amendment would allow individual employees to file a complaint in court against the employer, versus going through the DCWP. This could increase the number of complaints against employers in New York City.

The proposed amendment to ESSTA would allow employees who allege a violation of their rights to commence a civil action in court, where employees could seek compensatory damages, injunctive and declaratory relief, attorneys’ fees and costs, as well as other relief the court deems appropriate.

Also, the proposed amendment would increase the amount of monetary damages that individual employees could recover should they pursue recourse individually. Specifically, while the current law permits the DCWP to impose a civil penalty upon an entity or person found to have violated ESSTA of $500 for the first violation, $750 for subsequent violations that occur within two years of any previous violation (but not to exceed $750 for the second violation, and $1000 for each succeeding violation), the proposed amendment would allow such penalties per instance of violation.

The statute of limitations for commencing a civil action is two years.

Employers covered by ESSTA should write to the Mayor’s office and urge him to VETO this bill. The DCWP already imposes significant burdens on employers in New York City with the manner with which it enforces the law and the penalties it seeks, but by empowering employees to seek recourse independently in court, employers will face additional litigation and cost expenses associated with ESSTA compliance.

Effective November 13, 2023, Section 590 of New York Labor Law was amended to require employers to inform employees of their right to apply for unemployment benefits with the New York State Department of Labor (NYDOL) “at the time of each permanent or indefinite separation from employment, reduction in hours, temporary separation, [or] any other interruption of continued employment that results in total or partial unemployment.”  The  eligibility notice must be “in writing on a form furnished or approved by” NYDOL.  The notification will further be required to include: (i) “the employer’s name and registration number”; (ii) “the address of the employer to which a request for remuneration and employment information with respect to such employee must be directed”; and (iii) any other information that may be required by the NYDOL commissioner.

For per diem workers like home care aides, it is unclear what would constitute a reduction in hours.  Based on the language in the law, the stated intention, and references to Unemployment Insurance Law provisions about what reductions in hours qualify as a reduction for purposes of UI benefits, it appears that employees whose hours are reduced through no fault of their own to less than 30 hours per week, and they earn $504 or less in gross pay, would qualify to receive these notices.  However, please be sure to check with counsel before making any blanket determinations for your organization.

On January 9, 2024, the US Department of Labor (“DOL”) released the final rule, changing the criteria for classifying independent contractors under the Fair Labor Standards Act (“FLSA”).  The final rule, which rescinds the 2021 rule, will take effect on March 11, 2024.

As an initial matter, this DOL rule determines whether a worker is an employee or non-employee of an employer for purposes of minimum wage and overtime rules.  Other independent contractor tests, such as those under the National Labor Relations Act, determine a worker’s status for other purposes, such as whether or not an employee can join a company’s union.  And then there are of course definitions of “employment” and non-employees for purposes of other laws, such as the Affordable Care Act.  Again, however, this article only focuses on the DOL rule that defines what workers are entitled to minimum wage and overtime protections, and from which employers. 

Pursuant to the 2021 worker classification rule, the analysis for classifying a worker involved two main factors; (1) the nature and degree of control over the relevant worker; and (2) an individual’s opportunity for profit or loss.  The 2021 rule also required analysis of 3 less critical factors; (1) the amount of skill required for the work; (2) the degree of permanence of the working relationship; and (3) whether the work is part of an integrated unit of production. 

The new rule, which restores the former “totality of the circumstances” test, considers the following six factors:

1. The degree to which the employer controls how the work is done.

2. The worker’s opportunity for profit or loss.

3. The amount of skill and initiative required for the work.

4. The degree of permanence of the working relationship.

5. The worker’s investment in equipment or materials required for the task.

6. The extent to which the service rendered is an integral part of the employer’s business.

Furthermore, the analysis under the 6^th factor has been changed to a consideration of whether the service provided by the worker is critical, necessary or central to the company’s business.  In contrast, the previous “test” looked at whether or not the worker was an integral part of the business.

DOL has indicated that it will be providing the public with additional guidance in order to aide in employer compliance.  However, DOL has noted that the above six factors are not exhaustive, that neither factor will be weighed heavier than another, and that indeed the entire situation will dictate the DOL’s conclusions.

Employers who rely on independent contractors should periodically conduct internal independent contractor audits to ensure that the workers to whom they are paying “project fees” or other similar lump sum amounts are proper methods of compensation for the worker at issue.  This new DOL rule underscores the importance of conducting these audits because the new rule will deem more workers as “employees” for purposes of minimum wage and overtime.

On December 13, 2023, the U.S. Equal Employment Opportunity Commission (EEOC) announced the launch of e-file for attorneys, allowing attorneys to file charges of discrimination electronically on behalf of their clients, enabling a more efficient process for charging parties and the EEOC. Prior to implementing this electronic filing option, according to the EEOC, approximately a third of the charges received are filed by attorneys on behalf of their clients using mail, fax, or hand-delivery, and those charges are then processed by the EEOC manually. This electronic filing option will now enable attorneys representing charging parties to immediately upload a signed charge, or create a charge for their client to sign and submit through the EEOC Public Portal.

Under this e-file option, attorneys will not be able to file amended charges through the application, and will not be able to file a charge without disclosing a client’s identity. Once submitted, attorneys will be able to access the charge through the Public Portal.

A charge of discrimination is a signed statement asserting that an employer, union or labor organization engaged in employment discrimination, and requests the EEOC to take remedial action. If an employee believes they have been discriminated against in the workplace based on their age, disability, sex (including pregnancy, sexual orientation and gender identity), race, color, religion, national origin or genetic information, they must file a charge of discrimination with the EEOC prior to filing a lawsuit against their employer.

New York State recently enacted additional restrictions on confidentiality/nondisclosure language that can be contained in employment-related release agreements (including severance, separation, and settlement agreements).  Employers that have pending employment claims which they are settling, or employers who use template separation and release agreements, should review this article in detail.

Effective November 17, 2023, employers cannot include confidentiality and nondisclosure language within settlement agreements where, “the factual foundation…involves discrimination, harassment or retaliation, in violation of laws prohibiting discrimination, including discriminatory harassment or retaliation…unless the condition of confidentiality is the [individual’s] preference.”  This “preference” must be in writing.

These amendments also give individuals “up to twenty-one (21) days to consider” inclusion of the confidentiality provision. This amendment effectively makes the previously non-waivable Consideration Period waivable; individuals are now able to sign off on confidentiality language immediately upon being presented with the release, rather than waiting three weeks. 

Significantly, this law does not amend Section 5003-B of the New York Civil Practice Laws & Rules (CPLR) which requires plaintiffs to wait the full 21 days before signing an agreement containing a nondisclosure provision that would prevent the underlying facts and circumstances of any discrimination claim. This CPLR provision applies only to pending litigations and filed administrative charges, not pre-litigation disputes (including release of claims through a separation/severance agreement).

In addition, a release of claims in an employment agreement, separation agreement, release agreement, or similar agreement is unenforceable if it requires the individual who has breached a confidentiality provision of such agreement to pay liquidated damages or to forfeit the agreement’s consideration (i.e., money paid by the employer or former employer per the terms of the agreement).  Furthermore, such agreements cannot contain language where an individual states that the individual “was not in fact subject to unlawful discrimination, including discriminatory harassment, or retaliation[.]” Should the agreement contain such language the release of claims in the agreement would be void.

Employers should review – and modify where necessary – their separation, severance and settlement agreements that include release of New York-based claims to ensure compliance with these amendments to New York law.  Employers should also review agreements that are currently being considered or have been entered into from November 17 to present to ensure compliance and to determine whether modification (retraction, amendment, or supplementation) is necessary.

As New York employers kick off the new year, they should keep the following key dates in mind:

• February 15, 2024 – The statute of limitations for filing administrative claims of unlawful discrimination under the New York State Human Rights Law extends from 1 year to 3 years (running from the date of the alleged unlawful discriminatory practice). Claims of sexual harassment are already subject to this 3-year limitations period.
• March 12, 2024 – New York employers will be prohibited from requesting or requiring that an employee or applicant disclose any username, password, or other means for accessing a personal account through specified electronic communications devices as a condition of hiring, employment status, or for use in disciplinary actions. The law provides exceptions, including for accounts used for business purposes and devices paid for by the employer.
• May 20, 2024 – An amendment to the New York Labor Law goes into effect which sets forth wage and job protections for freelance workers (defined in the law as workers hired as an independent contractor for at least $800). The law requires companies that engage covered freelancers to enter into written agreements with such workers, which agreements must contain certain minimum requirements. This includes the name and mailing address of both parties, an itemization of services to be provided, the value of the services, the rate and method of compensation, the date on which payment must be made, and the date by which a worker must submit a list of all services rendered to meet any payment processing deadlines.  There is already a similar law in effect in New York City, but this law applies Statewide.