NY employers must get wages right—or it'll cost

April 10, 2011

By Daniel Massey / Crain's New York Business

A new state law intended to stop crooked bosses from cheating workers out of wages had employers across New York scrambling last week to get into compliance with more stringent record-keeping requirements—and left many of them grumbling about added expenses and potentially costly litigation.

The Wage Theft Prevention Act, which went into effect April 9, increases civil and criminal penalties for employers who violate wage and overtime laws, who don't keep proper records or who retaliate against workers complaining about compliance. It also compels all employers to notify workers of their wages and how they are calculated, at the time of hiring and every year thereafter.

Clients in a panic
“The intent was good, but the implementation, especially for large companies, is difficult,” said employment attorney Barbara Hoey, a partner at Littler Mendelson.

Some of Ms. Hoey's clients have 30,000 to 50,000 employees in New York state; they now must produce new forms and maintain new records for each worker.

“It can cost a lot of money,” she said, adding that she recently had “multiple clients calling up in a panic,” worried about getting notices to employees by last Saturday. She told them that they actually had until February 2012 to do so.

Small businesses also are affected. The Staten Island Chamber of Commerce sent an e-mail to its members last week to make sure they knew about the new requirements.

The state Department of Labor has tried to make it easier for employers to comply, providing online templates of the required forms in English, Spanish, Chinese and Korean. Even so, according to employment attorney Fred Leffler of Proskauer, the new notice requirements could lead to a spike in litigation brought by plaintiff lawyers who can now sue for unpaid wages and failure to provide proper paperwork. Penalties for lax record keeping are $50 a week, up to $2,500, plus costs and attorney's fees.

Staffers, state empowered
Paperwork aside, the new law also enables workers to recoup any unpaid wages plus a 100% penalty. The old law allowed for just 25% in damages. The act also beefs up protections for workers who are retaliated against—they can now get back pay, the 100% penalty, plus another $10,000—and gives the state's labor commissioner new powers to collect damages from employers who violate the law.

The activist group Make the Road New York and local retail and supermarket unions had pushed heavily for the new law. Proponents cited estimates that 300,000 city workers, most of them in health care, retail and food service, are cheated out of $960 million annually.

Amy Carroll, Make the Road's legal director, said the law's intent is “to change the economic calculus” that might incentivize bad-apple bosses. “Quadrupling penalties really puts a price tag on that model.”

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