New York Labor Law (NYLL) Section 191 sets out a “schedule” for the frequency of wage payments of various categories of workers, including manual workers, who must be paid on a weekly basis.  New York State’s Department of Labor has defined a “manual worker” to include employees who spend 25% or more of their time engaged in physical labor.  Prior to 2019, any claim brought against an employer for violating this section of the statute could be brought only by New York State’s Department of Labor.  If the Department of Labor found that an employer violated the frequency of pay statute, it typically would issue a civil penalty ranging from $1,000 to $3,000.

In 2019, in Vega v. CM & Associates Construction Management, LLC,¹ the Appellate Division, First Department, without explanation, broke with years of precedent and found a private cause of action for employees existed through Section 198(1-a) of the NYLL.  This has led to a flood of class action litigation by employees and former employees for their “late paid” wages. These employees and former employes are largely suing their former employers for wages that were paid in full but paid on a bi-weekly or semi-monthly basis. The lawsuits have been filed primarily in federal court, which, in contrast to state court, permits the recovery of liquidated damages in class actions.  Moreover, federal courts have followed the 2019 Vega decision in the absence of persuasive evidence that the Court of Appeals (New York State’s highest court) would reach a different conclusion.  Consequently, class action plaintiffs have frequently been awarded liquidated damages for “late paid” wages that were already paid in full (rather than merely interest for the lost time value of the late payment).  New York has a six-year statute of limitations on suits for unpaid wages, so these awards can be very large as claims frequently seek liquidated damages equal to 50% of total wages for such period, and contrast starkly with the $1,000 to $3,000 penalty previously imposed for late payment violations.

Governor Hochul’s Budget Proposal

On January 16, 2024, Governor Hochul announced her Executive Budget Proposal for the 2025 fiscal year, which includes language that would provide significant relief to employers currently faced with an onslaught of “frequency of pay” litigation.  Under the governor’s proposal,² which would need to be accepted by the legislature through the state budget process, Section 198 of the Labor Law would be amended to provide that “… liquidated damages shall not be applicable to violations of . . . section 191 of this article where the employee was paid in accordance with the agreed terms of employment, but not less frequently than semi-monthly.” 

This amendment to Section 198 of the NYLL was proposed as part of the governor’s Executive Budget.  The State Budget must be passed not later than April 1st of each year, but that timeframe is often extended several weeks as a result of extensive negotiations. Governor Hochul’s proposed amendment would preclude the award of liquidated damages for “manual worker” frequency of pay claims and provide significant relief from the windfall amounts being sought as liquidated damages.  Under this proposal, employees would still be able to pursue claims with the state Department of Labor, as in the past, but this could be the beginning of the end of the recent spate of litigation that has hit employers in recent years.

Grant v. Global Aircraft Dispatch

On January 17, 2024, the Appellate Division Second Department in Grant v. Global Aircraft Dispatch Inc., declined to follow the holding in Vega, and held that it was proper to dismiss a claim for liquidated damages for failing to pay alleged manual workers weekly.  In its decision the Second Department majority explained that “we do not agree that the payment of full wages on the regular biweekly payday constitutes non payment or underpayment” and that Labor Law § 198 creates a private right of action only for non-payment or underpayment of wages, not for late payment where wages are paid in full on the employer’s regular payday.

While the First Department’s holding in Vega remains in effect, this decision creates a split among New York’s Appellate Departments, giving rise to a greater likelihood of an appeal reaching the Court of Appeals.  Perhaps most importantly, such a split provides a significant and much-needed opportunity for employers litigating against frequency of pay claims to seek to dismiss or stay proceedings in light of this decision, as previously federal courts were unlikely find a basis to do so.

* * *

The impact of these two developments on either currently pending or future claims is not yet entirely known. Businesses faced with these issues are strongly encouraged to speak to experienced employment counsel.

Littler will continue to monitor and report on both of these items.