Alcott HR Executives Caution New York Employers Regarding New Wage Theft Prevention Act

Alcott HR Group wants New York employers to be aware and prepared for another onerous law requiring their compliance. The “Wage Theft Prevention Act” (“The Act”) was signed into law on December 10, 2010 by then New York Governor David Patterson, and Alcott HR Group co-founders President Louis Basso and Executive Vice President Barry Shorten see trouble ahead for many unsuspecting employers.

Under The Act, employers will be subject to increased wage violation penalties, increased penalties for retaliation, and additional enforcement tools that the Department of Labor and courts can apply to investigate “wage theft” cases and collect monies on behalf of their employees working in New York. It is the State’s attempt to address what it believes is the widespread problem of unscrupulous employers “stealing” wages from their employees both by not paying the agreed upon wage and/or failing to pay the minimum wage. The National Employment Law Project estimates that more than $1 billion is “stolen” annually from New York City workers alone from unprincipled employers.

“This is a comprehensive law which made significant changes to Section 195 of the Labor Law, which was amended just last year to require employers to give employees written notice of their regular and overtime rates” said Basso. “With the passage of the Wage Theft Prevention Act, employers must now issue the written notice to all employees upon their hire, whenever their wages change, and by February 1st of each year. The notice also must include the basis of the employee’s pay rate (i.e., whether the wage rate is calculated by hour, shift, day, week, salary, piece, commission, etc.), as well as disclose if the employer claims deductions for meals or lodging. Additionally, the employer’s address and contact information must be included in the written notice. There is also a requirement that the notice be provided in English as well as an employee’s primary language.” Under the Act, the Department of Labor is required to develop the templates for non-English notices to assist in this aspect of compliance.

Shorten spoke to the penalties for failure to comply. “Failure to provide this written notice to their employees within ten business days of the employee’s first day of employment could result in an action by either the Commissioner of Labor or the employee to recover damages at the rate of $50 for each work week that the violation occurred, plus costs and reasonable attorney’s fee,” noted Shorten. He added that, “Damages recoverable for prevailing employees are capped at $2,500, however, no such maximum applies for actions brought by the Commissioner, and so you can see that the dollars can mount very quickly.”

Other significant aspects of The Act include the new required enhancements to employees’ wage statements. They must now include: the employee’s name; employer’s name, address and phone number; the dates covered by the wages; the rate(s) of pay; the basis for calculating wages (i.e., hourly, piece, etc.); deductions from wages; allowances claimed by the employer; and net wages. Non-exempt employees’ wage statements must have the additional disclosure of regular rate(s) of pay, the overtime rate(s) of pay, non-overtime hours worked, and overtime hours worked. An employer’s failure to pay wages will now come with increased penalties.

Continued Basso, “In the past, an employee who prevailed in court on a failure to pay wages claim received the total amount of the underpayment, costs, attorney’s fees, and where it was found that an employer acted willfully, liquidated damages equal to 25% of the underpayment. The new law allows a prevailing employee to recover payment of all wages due, costs, attorney’s fees, prejudgment interest, and potential liquidated damages equal to 100% of the total wages due. It is a significant increase in the potential penalties.” The Act also increases the amount of a judgment by 15% if an employer refuses to pay for 90 days after being found to owe money for “stolen” wages. There are also criminal misdemeanor sanctions of up to a year in prison and a $5,000 fine for a failure to pay minimum wage, and felony charges for repeat offenders.

“When you also factor in that an award of unpaid wages can go back as far as six years, the magnitude of this new legislation becomes even more apparent,” said Shorten.

In addition to these aspects of The Act, there are also more rigid sanctions for whistleblower or anti-retaliation acts. The Act calls for penalties against “any person” found to be retaliating against an employee who expresses concern over wage payments which include payment of liquidated damages of up to $10,000, along with costs and attorney’s fees. Unlawful retaliation also is deemed a class B misdemeanor.

Basso and Shorten urged employers to review all payroll policies and practices, employee classifications and document retention policies to be prepared for the effective date of this new legislation, April 9, 2011.

To learn more about The Wage Theft Prevention Act, please click here to view our recent webinar on Employee Misclassification Issues – What Every Employer Needs to Know.


On March 25th, 2011, posted in: Help For Human Resources, Small Business Tips by
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