In 2019, the stakes for New York employers increased dramatically with respect to "late" payment of wages claims (also known as "frequency of pay" claims) under the New York Labor Law (NYLL). Following a decision by New York’s Appellate Division First Department, for the first time, employees meeting the definition of a "manual worker" could bring claims in court and receive liquidated (double) damages in the form of wages for “late pay” even though they had been paid in full. Thus, paying someone biweekly or bimonthly when the law required weekly pay now produced enormous potential liability.

As a result, since 2019 there has been a flurry of expensive litigation activity in frequency of pay claims. In good news for New York employers, the direction seems to be changing. A court in New York’s Appellate Division Second Department (covering Brooklyn, Queens and Long Island) issued an opinion disagreeing with the 2019 First Department decision, creating a split of authority. In addition, the Governor has proposed legislation to end the controversy, by substantially narrowing the circumstances in which frequency of pay claims can be brought.

That said, following the split of authority in state courts, federal courts interpreting those decisions are creating a split of authority of their own.

Background

Section 191 of the New York Labor Law requires that workers are paid on a certain schedule. Certain categories of workers must be paid on a weekly basis. Included in this group of workers are “manual” workers, who are considered by the NYS Department of Labor as a broad group of employees who spend 25% or more of their time engaged in physical labor. These definitions are far from clear, as "physical labor" is not self-defining.

Until 2019, only the State Department of Labor could bring claims against employers for violating Section 191 by not paying their employees on a timely basis. Liable employers were subject to civil penalties of up to $3,000 dollars.

This changed in 2019, following the Appellate Division First Department’s decision in Vega v. CM & Associates Construction Management, LLC. For the first time, the Appellate Division found a private cause of action for employees existed through Section 198(1-a) of the NYLL. In the subsequent flurry of lawsuits filed by current and former employees against their employers, plaintiffs sued often in class actions for fully paid but nevertheless “late” wages as liquidated damages. In those cases, the wages were “late” because employers used other payroll frequencies, such as bi-weekly or semi-monthly.

The Second Department Determines Vega Misinterpreted the Law
On January 17, 2024, over four years after Vega was decided, the New York State Appellate Division, Second Department declined to follow Vega in Grant v. Global Aircraft Dispatch Inc. The Grant court reasoned that Section 198 of the NYLL only creates a private right of action for non-payment and underpayment of wages, and that late payments do not fit into either category. The Court held that such a reading of Section 198 would be inconsistent with the drafting of the law and the mechanisms for relief explicitly written into the New York Labor Law.

Governor Hochul Proposes to Modify the New York Labor Law to Eliminate Liquidated Damages for Frequency of Pay Claims for Manual Workers
In January 2024, Governor Hochul announced her Executive Budget Proposal for 2025. The proposed budget includes amendments to Section 198 of the NYLL. Specifically, the budget includes proposed legislation which provides that as to manual workers “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.” If the proposed budget is passed by the State Legislature – which has been extended past the April 1 – employees would be disincentivized to file private “frequency of pay” actions because they would not receive the financial benefits of liquidated damages.

The Federal Courts’ Split Direction
Prior to the Grant decision, federal courts in New York had been following the Vega decision. However, as an example of the continuing controversy, on February 12, 2024, just a few weeks after the Grant decision created a split of authority in the state courts, the Southern District of New York decided the first federal case since the Grant decision. In Zachary v. BG Retail, the Court acknowledged the split in New York’s appellate courts following the Grant decision but chose to apply the Vega standard, finding that it most accurately reflected the purpose of the New York Labor Law.

The Court found that while Section 198 does not directly refer to late payments, private relief for late payments can be inferred because Section 191 clearly states that “no employee shall be required as a condition of employment to accept wages at periods other than as provided in this section.” In the Court’s view, that language demonstrates the intent to provide a private right of action for manual workers under Section 198. In reaching its decision, the Court also considered the pending legislation referenced above that would bar liquidated damages for frequency of pay claims for manual workers. The Court conceded that its interpretation of the law may soon be invalidated by the New York legislature but found that prospective legislation has no effect on the existing interpretation of the law. In the aftermath of the Zachary decision, on February 27, 2024, two other Southern District courts, Gamboa v. Regeneron Pharms., Inc., and Saramiento v. Flagge Contracting Inc., followed Vega’s standard.

Most recently, on March 7, 2024, the case of Galante v. Watermark Service IV, LLC., in the Western District of New York rebuffed Vega and found that manual workers do not have a private right of action under section 191. In Galante, the defendant owned and operated senior living communities, and the plaintiffs served as housekeepers and maintenance persons at one of the defendant’s facilities. The plaintiffs identified as manual workers and alleged that they were paid on a biweekly basis in violation of Section 191.

The Court concluded that the Second Department's rejection of an express private right of action in Grant better reflects how the New York Court of Appeals would decide the issue. The Galante court reasoned that the NYLL “is better understood” as providing a remedy for “violations of statutes governing how much an employer must pay and employee, not how frequently the employer must do so.”

Key Takeaways for New York Employers
While relief may be coming for New York employers who are subject to these “frequency of pay” lawsuits, the current state of the law remains unsettled. New York state courts are split on the issue, and federal courts may choose to follow either Vega or Grant. Either the New York Court of Appeals or the State Legislature will need to make the final decision on this controverted interpretation of the law.

In the interim, employers should review job descriptions and duties to determine the proper frequency of pay tied to their job duties while paying attention to continuing developments.

[View source.]