Employer Exposure in Unpaid Wage Lawsuits May Decrease as Second Circuit Refuse to Apply New York Wage Theft Prevention Act's Liquidated Damages Provision Retroactively

In 2010, New York enacted the Wage Theft Prevention Act, which in part amended its Labor Law to require courts to impose a liquidated damages award of 100% of the total unpaid wages owed to the employee. The law previously capped the award at just 25%. This amendment significantly increased employer exposure in unpaid wage lawsuits. However, the amendment did not specifically address whether courts should apply the liquidated damage award increase retroactively. Recently, the Second Circuit Court of Appeals – New York’s highest Federal court – in Gold v. New York Life Insurance Co. answered that question in the negative.

The Second Circuit held that employees may only recover a 100% liquidated damage award on unpaid wage claims accruing after the amendment became effective, and all other claims accruing before that time were still subject to the 25% cap. While this is certainly good news for employers, this does not necessarily mean that this issue has been fully resolved.

To date, the Court of Appeals – New York’s highest state court - has not weighed in on this issue, and only one New York State court (I think) has addressed this issue. In Ji v. Belle World Beauty, Inc., a New York trial court judge went in the other direction concluding that the amendment should be applied retroactively. Until the Court of Appeals addresses this issue or the New York State courts reach a general consensus, employers should continue to account for a possible retroactive application when building exposure models in anticipation of, or during current, litigation in State court. If any new case emanating from a State court addresses this issue, we’ll let you know.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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