Following a recent court decision and pronouncement from the governor, New York employers may see a decline in the number of "frequency of pay" lawsuits brought by manual workers for failure to pay on a weekly basis. This would reverse the trend we have seen over the last several years in which a significant increase in "frequency of pay" class action lawsuits have been brought on behalf of manual workers who were being paid bi-weekly and not weekly.
In Grant v. Global Aircraft Dispatch Inc. ("Grant") the Appellate Division, Second Judicial Department (the "Second Department") held that there is no express or inferred private right of action under Section 198(1-a) of the New York Labor Law ("NYLL") for liquidated damages, attorneys' fees, or prejudgment interest for manual workers not paid in compliance with Section 191 of the NYLL. The Second Department is the appellate court that reviews lower court decisions from Nassau, Suffolk, Westchester, Kings, Queens, Richmond, Rockland, Orange, Dutchess, and Putnam counties.
Furthermore, on January 16, 2024, Governor Hochul announced her annual Executive Budget Proposal, part of which proposed an amendment to NYLL Section 198 to provide that liquidated damages are not available under NYLL Section 191 "where the employee was paid in accordance with the agreed terms of employment, but not less frequently than semi-monthly." This proposal would need to be accepted by the legislature through the state budget process. Typically, the state budget must be passed by April 1 of every year, but that timeframe is often extended several weeks as a result of extensive negotiations.
The Legal Landscape Leading Up to 2019
Section 191 requires that employers pay manual workers on a weekly basis. The New York Department of Labor ("NYDOL") defines a "manual worker" as an employee who spends 25 percent or more of their time engaged in physical labor. NYLL Section 198(1-a), which sets forth the enforcement mechanism for certain violations of the NYLL, including Section 191, permits liquidated damages as recovery for nonpayment and underpayment of wages but does not provide a remedy for untimely payment of wages that are paid in full.
In 2019, in Vega v. CM & Associates Construction Management LLC ("Vega"), the Appellate Division, First Judicial Department ("First Department") held that manual workers may recover liquidated damages, typically measured as the full amount of the underpayment, in cases where they were paid late even if they had been paid in full. The First Department's decision in Vega essentially created a private right of action for manual workers who are not paid weekly under Section 191 for the potential recovery of liquidated damages, attorneys' fees, and prejudgment interest even if they were ultimately paid in full.
The First Department is the appellate court that reviews lower court decisions from New York and Bronx Counties.
The Second Department's Decision in Grant
In Grant, the Second Department held that the reasoning in Vega was incorrect and that Section 198(1-a) does not confer a private right of action on manual workers for violations of Section 191. Specifically, the Second Department found that: (1) Section 198(1-a) addresses nonpayment and underpayment of wages rather than frequency of payment; and (2) payment of full wages biweekly, rather than weekly under Section 191, does not constitute nonpayment or underpayment of wages.
On that basis, the Second Department determined that liquidated damages are not available under Section 191. The Second Department also rejected the plaintiff's contention that such a private right of action should be implied, stating that a private right of action cannot be implied from the statutory provisions and their legislative history unless the creation of such a right would be consistent with the legislative scheme.
Implications for Employers
The Grant decision clarifies that while employers are required to pay manual workers on a weekly basis under Section 191, there is no private right of action for violations of this provision. This means that employers cannot be sued by employees for liquidated damages, prejudgment interest, and attorneys' fees for failing to pay manual workers weekly.
While the Grant decision and Governor Hochul's proposal may eventually provide some relief for employers from a litigation risk perspective, they do not eliminate the need for employers to comply with wage payment laws. Employers should not interpret the Grant decision as a green light to disregard the weekly pay requirement; especially those employers with operations in New York City, Bronx, and other areas of New York outside the jurisdiction of the Second Department. Moreover, the NYDOL can still enforce Section 191 by imposing civil penalties of up to $1,000 for a first violation, $2,000 for a second violation, and $3,000 for a third or subsequent violation.
Finally, we expect the New York Court of Appeals to eventually provide a final answer as to whether manual workers have a private right of action to pursue frequency of pay claims in light of the split of authority between the First and Second Departments. In the meantime, employers should continue to ensure that their payment practices comply with all applicable laws and regulations, including by paying their manual workers on a weekly basis.