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.