Two recent developments may signal the beginning of the end for the wave of "frequency-of-pay” litigation that has hit New York employers in recent years.

In a victory for New York employers, the Appellate Division, Second Department, ruled on January 18 that there is no private right of action for violations of New York Labor Law § 191 (“Section 191”). The law mandates weekly payment to “manual” workers in New York State. In addition, Governor Hochul’s proposed budget includes amendments to the New York Labor Law that would preclude awards of liquidated damages in certain “frequency-of-pay” lawsuits.

Background on New York Labor Law Section 191 and Frequency-of-Pay Claims

Section 191 establishes a “schedule” for how frequently workers must be paid. It requires manual workers be paid on a weekly basis. New York State’s Department of Labor (DOL) defines manual workers to include any employees who spend 25% or more of their time engaged in physical labor. The DOL’s definition is sweepingly broad, and much more expansive than the law’s traditional definition of “manual worker.”

While Section 191 and its predecessors have been on the books for more than a century, employers historically had little concern over it. As interpreted by the courts for decades, manual workers could only bring claims alleging violations of Section 191 before the DOL. If employers were found in violation, the employers would only pay a fine, so long as the business had indeed paid the manual workers all their pay, albeit a week “late.”

The landscape changed in 2019, when the Appellate Division, First Department, ruled the New York Labor Law creates a “private right of action” for violations of Section 191, in the case Vega v. CM & Associates Construction Management, LLC. In other words: the Vega court ruled that employees could bring private lawsuits against employers for issuing payment on a bi-weekly schedule rather than a weekly schedule — even if the employees received all of their regular pay. The court reasoned that employees could sue for receiving bi-weekly pay when they were technically owed a paycheck every week, because the “moment that an employer fails to pay wages in compliance with [Section 191] the employer pays less than what is required.” The decision marked the first time a New York appellate court ruled employees could bring private lawsuits for violations of Section 191.

The Vega decision opened the floodgates for class action litigation by employees for late-paid wages. These lawsuits have been typically filed in Federal court, which permits the recovery of liquidated damages in class actions.

Consequently, class action plaintiffs since 2019 have filed hundreds of lawsuits after the Vega ruling, demanding liquidated damages for “late paid” wages that were already paid in full.

While many employers sought to dismiss these lawsuits, New York’s federal courts have almost uniformly continued to follow the Vega decision. These decisions largely hinged on the federal courts’ reluctance to issue decisional rulings on “novel” issues under state law, which is exactly what was presented by the absence of state court decisions running counter to Vega.

Appellate Ruling Disagreeing with Vega Decision: Grant v. Global Aircraft Dispatch, Inc.

In Grant v. Global Aircraft Dispatch, Inc., decided January 18, 2024, the Appellate Division, Second Department rejected the reasoning articulated by the First Department in Vega. In so doing, the Grant court affirmed the dismissal of a frequency-of-pay claim where an employer paid manual workers in full, but not weekly. As stated by the Grant court: “We do not agree that the payment of full wages on the regular biweekly payday constitutes nonpayment or underpayment.”

The Second Department’s decision creates a split among the Appellate Divisions (New York state’s intermediate appellate courts), opening the possibility the New York Court of Appeals will be asked to offer a definitive ruling on the matter. In the interim, employers in active frequency-of-pay litigation may re-assess their strategy in defending against these claims.

In short: while not determinative, the Grant ruling brings much-awaited reinforcement for employers facing Section 191 claims.

Governor Hochul’s Budget Proposal

Separate from the litigation on frequency-of-pay claims: on January 16, 2024, Governor Hochul announced a proposed amendment to Section 191 in her Executive Budget Proposal for the 2025 fiscal year. The proposed amendment language would limit the damages that can be awarded in lawsuits alleging violations of Section 191. Under the Governor’s proposal, the Labor Law would be amended to state: “… liquidated damages shall not be applicable to violations of . . . [Section 191] where the employee was paid in accordance with the agreed terms of employment, but not less frequently than semi-monthly.” In other words, the amendment would effectively “OK” the widespread and commonly-accepted industry practice of bi-weekly pay.

As currently drafted, the proposed amendments to the law would take effect 60 days after becoming law. The State Budget must be passed no later than April 1 of each year, but that timeframe is often extended several weeks due to 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. Employees would, however, still be able to pursue claims with the state Department of Labor, as they had in the past.

Next Steps and Going Forward

The two developments offer a welcome reprieve for businesses operating in New York. The tide may finally be turning, but to be sure, the risk of Section 191 claims is still present. Businesses that pay all workers — including those who perform “manual” work, are still well-advised to review their pay practices with employment counsel. Options such as converting to a weekly pay system or applying for a variance from the requirement with the Department of Labor are common strategies to terminate frequency-of-pay liabilities prospectively, though businesses should carefully evaluate any existing liabilities before changing pay methods.