Governor Andrew Cuomo signed a bill (S858) that amends the New York Labor Law to make it easier for employees to bring claims against their employers for alleged unpaid and/or owed wages.  The legislation, titled the “No Wage Theft Loophole Act,” aims to eliminate what its supporters say is a “judicially created loophole” regarding whether the Labor Law’s sections prohibiting improper deductions and enabling employees to bring private lawsuits against their employers apply when an employer withholds an employee’s pay entirely (and not just a portion of it).  The new law took effect immediately upon the governor’s signing on August 20, 2021.

Article 6 of the New York Labor Law

Article 6 of the Labor Law (titled “Payment of Wages”) generally provides protections to employees who believe their wages have been unlawfully withheld from them by their employer.  Among Article 6’s operative provisions are Section 193 (“Deductions from wages”), which identifies specific authorized deductions under the Labor Law while expressly prohibiting any deduction from an employee’s wages unless the deduction is authorized and for the employee’s benefit, and Section 198 (“Costs, remedies”), which provides that, “[a]ll employees shall have the right to recover full wages, benefits and wage supplements and liquidated damages accrued during the six years previous to the commencing of such action[.]”

What the “No Wage Theft Loophole Act” Provides

Supporters of the “No Wage Theft Loophole” amendment, including the legislation’s sponsors, say that courts have misconstrued Sections 193 and 198 of the Labor Law by erroneously concluding that employees cannot bring claims for “unlawful deductions” under Section 193 and 198 where an employer withholds all—instead of part—of an employee’s earnings.  As described in a lengthy “Justification” section, the legislation’s sponsors contend:

Section 193 of the Labor Law prohibits any deductions from wages unless the deduction is expressly authorized by the employee in writing and for his or her own benefit.  While this language seems clear enough on its face to ward against any wage theft, much confusion has arisen over the term “deduction” and what this could possibly represent. For many of us, “deduction” calls to mind a literal notation on a paystub of wages subtracted, which leads to the question: what if the wage theft is not denoted by a line on a paystub? One can imagine a whole host of scenarios, for example, which clearly violate the intent of Section 193 without conforming to this narrow definition of a “deduction.”

[A]n employer could withhold wages but simply fail to note the deduction on a paystub.  Alternatively, an employer could deny the existence of the full amount of wages owed and claim that the employee’s paycheck that month was a discretionary amount that the employer decided based on the quality of the employee’s work. Or an employer could choose to withhold the pay entirely, as the statute simply prohibits “ANY” deduction. But does “any” mean “all”? What if the statute does not prohibit the withholding of an entire paycheck?

The No Wage Theft Loophole Act, in an attempt to address the foregoing examples and the purported “judge-made loophole,” adds the following language as a new subdivision 5 to Section 193, and to the end of subdivision 3 of Section 198: “There is no exception to liability under this section for the unauthorized failure to pay wages, benefits or wage supplements.”

Implications

Although the legislature’s intent to broaden the protective scope of the Labor Law’s provisions is clear, it is unknown how the relatively terse amendments to Sections 193 and 198 will be interpreted by the NY Department of Labor and judges in New York, nor the scope to which employees (and plaintiffs’ lawyers) will use the newly-added language to bring additional claims.  Nor is it clear how the foregoing language will affect existing caselaw regarding employees’ claims for unpaid wage supplements, which generally have been narrowed by case precedent. Lastly, the amendment is silent about whether it applies retroactively; while we presume that the law will only apply prospectively, we should expect employees to assert that it applies retroactively.

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