Controversial Decisions on Frequency of Pay Law in New York and What Employers Need to Know

Recently, New York employers have seen some developments signaling the possible end to the popular frequency of pay lawsuits filed in the past couple of years.  These frequency of pay lawsuits have become more than a nuisance to New York employers as a decision rendered by New York’s Appellate Division First Department in 2019 allowed for “manual workers” to assert private right of action against their employers and receive liquidated damages for “late pay” even when those employees were paid in full.  Since that decision, New York employers have faced enormous liability when paying employees biweekly or bimonthly.

Background

New York Labor Law (“NYLL”) section 191 requires that “manual workers” in New York are to be paid on a weekly basis.  A “manual worker,” defined by New York’s Department of Labor (the “NY DOL”), includes any employees spending 25% or more of their time engaged in “physical labor.”  “Physical labor” has been interpreted broadly to include countless physical tasks performed by employees.  Prior to the 2019 decision referenced above, only the NY DOL could commence actions against employers for violating NYLL section 191 for failure to pay employees on a timely basis.  In cases where the employer was found liable, they could be subject to up to $3,000 dollars in civil penalties.

Appellate Ruling on NYLL Sections 191 and 198

The 2019 Appellate Division (First Department) decision in Vega v. CM & Associates Construction Management, LLC, held that a private cause of action for employees existed under NYLL Sections 191 and 198(1-a) and employees could receive liquidated damages, typically measured as the full amount of the underpayment, in cases where the employees received their pay late and even if the employee received their full pay.  This decision set off a spur of frequency of pay lawsuits as proposed class actions filed against employers in New York federal courts.  Unfortunately for employers, New York’s federal courts have mostly entered decisions in line with the Vega decision due to the federal courts’ averseness to render decisions on state law issues.

The Second Department’s Divergence from Vega Ruling

However, it seemed that the tides were changing in favor of employers when it came to frequency of pay lawsuits.  On January 17, 2024, the Appellate Division (Second Department) declined to follow Vega in Grant v. Global Aircraft Dispatch Inc.  In the Grant decision, the court found that the Vega court misinterpreted the law and reasoned that NYLL Sections 191 and 198 do not create a private right of action for late payments.  The law only provides a private right of action for underpayment and/or non-payment of wages; late payments of wages are not covered under either section of the law.  It now seems the landscape of frequency of pay decisions is split among New York’s Appellate Divisions and there is a possibility that the New York Court of Appeals will be tasked with rendering a definitive ruling on the matter.

The Split Decisions in New York’s Federal Courts

While some New York employers thought the Grant decision would provide a win and a definitive answer to this legal conundrum, on February 12, 2024, the Southern District of New York in Zachary v. BG Retail held that the interpretation of NYLL Section 191, which states that “no employee shall be required as a condition of employment to accept wages at periods other than as provided in this section,” infers that employees have a private right of action with respect to late payments.  The Zachary court acknowledged the split decisions reached by New York’s appellate courts but chose to follow the Vega standard, holding that it reflects the legislative intent and purpose of NYLL 198.  However, the Zachary court did recognize that its reading of the law could soon be invalidated by New York’s legislature but that any prospective legislation would not influence decisions rendered under New York’s current laws.  This can be seen by two other decisions rendered by courts in the Sothern District of New York, in Gamboa v. Regeneron Pharms., Inc., and Saramiento v. Flagge Contracting Inc., which followed the reasoning and holding in Vega.

Thereafter, on March 7, 2024, in Galante v. Watermark Service IV, LLC., a case filed in the Western District of New York, the court followed Grant court and held that manual workers are not afforded a private right of action under NYLL Section 191.  The Galante court found that the NYLL seeks to provide a remedy for “violations of statutes governing how much an employer must pay an employee, not how frequently the employer must do so.”  Further, the Galante court held that the New York’s Second Department’s rejection of the express private right of action as decided in the Grant decision is more likely in line with how the New York Court of Appeals would decide the issue.  However, to further illustrate the confusion faced by New York employers, two months after Galante, in Cooke v. Frank Brunckhorst Co., LLC, Magistrate Judge Joseph Marutollo in the Eastern District of New York questioned Galante’s interpretation of Section 191 in denying an employer’s motion for reconsideration of a conditional certification decision.

What Should New York Employers Expect?

Since two of New York’s four Appellate Departments have issued contrasting rulings on this issue, it can be confusing for employers to determine their best course of action.  Courts located within the First Department, which covers Manhattan and the Bronx, must follow the First Department’s precedent set in the Vega decision.  Courts located within the Second Department, which includes Brooklyn, Queens, Staten Island, Nassau and Suffolk counties, along with several counties north of New York City, are required to follow the precedent set forth in the Grant decision.  Until there is a binding ruling from the New York Court of Appeals or from an appellate court in the Third or Fourth Departments, courts in those departments can choose which case precedent to follow depending on the facts set forth before them.  Thus, it is unclear how the remainder of the New York Appellate Courts, along with the federal courts, will view this issue.  Hence, it is likely that workers will continue to forum shop and choose to bring their claims in New York’s federal courts to avoid the employer-friendly case precedent set forth in Grant.

Until the New York Court of Appeals renders a decision on this issue or the New York State Legislature enacts a law amending NYLL Sections 191 and 198, employers should review all job descriptions to ensure all employees are receiving the proper frequency of pay in accordance with the law.

This summary is provided for informational purposes only and is not intended to constitute legal advice nor does it create an attorney-client relationship with Rimon, P.C. or its affiliates.

Dave Mahoney advises private business owners and their human resources professionals on how to navigate the always evolving employer-employee relationship. Dave is a trusted resource who advises companies, large and small – union and non-union, with the day-to-day challenges of complying with constantly changing federal, state, and local laws. Dave takes a proactive approach, helping employers avoid disputes by establishing policies and procedures that are designed to establish clear avenues of communication and expectations between companies and their workforces to avoid litigation whenever possible. Dave also regularly conducts internal audits and investigations to solve problems before they arise. Read more here.

Haley Trust practices in the areas of bankruptcy and creditors’ rights, trusts and estates and labor and employment law. Read more here.