New York Court Ruling Holds No Private Right Of Action For Pay Frequency Claims

In a massive victory for New York employers, the Appellate Division, Second Department, held on January 18, 2024, that there is no private right of action for violations of New York Labor Laws § 191, which requires “manual workers” to be paid at least weekly. That decision contradicts a 2019 First Department decision that recognized a private right of action for pay frequency claims under Section 191, sparking a wave of “manual worker” pay frequency lawsuits.

As part of her annual Executive Budget Proposal, Governor Hochul announced on January 16, 2024, a proposal to amend New York Labor Laws § 198 to state that liquidated damages under Section 191 cannot be recovered “where the employee was paid in accordance with the agreed terms of employment, but not less frequently than semi-monthly.” This would in essence codify the Second Department’s decision, further doing away with these pay frequency claims across the remainder of the state.

It is important to look at the background surrounding the uptick in pay frequency claims, the Second Department’s decision, and Governor Hochul’s Executive Budget Proposal, as they could have major implications for employees and employers in the years to come.

HISTORY OF NEW YORK LABOR LAW SECTION 191 AND BACKGROUND ON FREQUENCY-OF-PAY CLAIMS

Section 191 requires manual workers to be paid on a weekly basis. The State Department of Labor (DOL) defines a manual worker as any employee who spends 25% or more of their work hours engaged in physical labor.

Even though Section 191 and its predecessors have been in place for almost a century, it has not received much attention until recently. For many years, courts held that claims for violations of Section 191 could not be commenced in court and could only be filed with the DOL. If employers were discovered by the DOL to be in violation of the weekly pay requirement under Section 191, they would be required to pay a fine to the DOL but would not be required to pay liquidated damages to the employees, as long as the company had actually paid all of the wages owed, even if the payment was not strictly timely according to Section 191.

But that changed in 2019, when the First Department held in Vega v. CM & Associates Construction Management LLC that the New York Labor Law did in fact create a private right of action for pay frequency violations of Section 191. Vega sent a message to employees and to plaintiffs’ employment lawyers that they could bring private lawsuits against employers for issuing payments on a bi-weekly schedule rather than a weekly schedule and that the employer could be liable for liquidated damages for the violation even if it had ultimately paid the employee all the wages it owed.

Vega opened the floodgates for class or collective action litigation by employees for late wage payments. New York courts and federal courts applying New York law mostly followed Vega, recognizing a private right of action that entitled manual workers to be awarded liquidated damages when they were paid biweekly instead of weekly. The three other Departments of the Appellate Division were not bound by Vega, but no other appellate court departed from its holding until the Second Department’s decision in Grant v. Global Aircraft Dispatch, Inc.

THE SECOND DEPARTMENT’S DECISION IN GRANT

On January 18, 2024, the Second Department held in Grant?that Sections 191 and 198 of New York Labor Law do not provide employees with a private right of action to recover damages because they were paid biweekly instead of weekly.

The court reasoned that the language of Section 198 “supports the conclusion that this statute is addressed to nonpayment and underpayment of wages, as distinct from the frequency of payment” and that the payment of full wages on the regular payday does not equate to “nonpayment or underpayment,” even when it is not timely paid as Section 191 requires.

The court supported this conclusion with a discussion of Section 198’s provision for liquidated damages. The court reasoned that because Section 198 provides for liquidated damages as an “additional amount,” it requires “underpayment as the primary, foundational remedy.” Put simply, if there is no underpayment or nonpayment, there are no liquidated damages available. Hence, manual workers whose employers violate Section 191’s weekly payment requirement cannot recover liquidated damages for such a violation.

This decision creates a split between the First Department and the Second Department. This split could be settled if Grant is decided by the New York Court of Appeals. Otherwise, courts in the Second Department (Kings, Queens, Nassau, Suffolk, Putnam, Westchester, Rockland, Orange, Richmond, and Dutchess counties) will be required to follow Grant, while courts in the First Department (New York and Bronx counties) will be required to follow Vega. Meanwhile, federal courts and New York courts outside the First and Second Departments will be forced to choose sides.

IMPLICATIONS FOR EMPLOYERS AND NEXT STEPS

The Grant case creates a conflict between two New York appellate courts on whether there is a private right of action for violations of the pay-frequency provisions in Section 191. The Vega decision opened the floodgates for pay frequency litigation, and the Grant decision curtails such litigation at least in the Second Department.

The Court of Appeals could provide some finality on whether there remains a private right of action for such violations, but absent a Court of Appeals decision recognizing a private right of action, Grant may be the beginning of a trend making Vega the minority position and ultimately leading to Vega being overruled. And regardless of what happens in the courts, Governor Hochul’s proposed amendment, if it is successful, would codify the Grant position. If Grant wins out, either in the courts or through legislation, that may provide welcome relief from litigation risk to employers who employ manual workers and have not been in compliance with Section 191’s weekly pay requirement.

Employers should remain mindful of the need to comply with wage payment laws. Vega has not been overruled, and employers in the First Department should comply with Section 191. Employers in the Third and Fourth Departments may also still face litigation if they do not comply with Section 191. And even in the Second Department, there is still a risk that Grant could be overruled by the Court of Appeals. Whether or not there is a cause of action for employees to sue for liquidated damages for pay-frequency violations of Section 191, Section 191 is still the law of the land, and the DOL can impose penalties and fines on employers that do not comply, up to $1,000 for a first violation, $2,000, and $3,000 for additional violations.

Allen Shoikhetbrod is the Managing Partner of Tully Rinckey PLLC’s Albany office and?is also the Practice Chair of the New York State Labor and Employment Practice as well as a Team Leader for the Federal Employment Practice.

Jared Cook is a Senior Counsel in Tully Rinckey PLLC’s Rochester office, where he focuses his practice on federal and state labor and employment.

Allen and Jared can be reached at [email protected] or at (888) 244-4930.