A change to Section 195 of New York State’s labor law goes into effect on October 26th, 2009. Section 195 contains notice and record-keeping requirements related to the payment of wages. It always required that new employees be notified upon hiring of their rate of pay. However, new language added to Section 195 states that an employer shall:
- notify his or her employees, in writing at the time of hiring of the rate of pay . . . and obtain a written acknowledgement from each employee of receipt of this notice . . .[and for] all employees who are eligible for overtime compensation . . . the notice must state the regular hourly rate and overtime rate of pay
The requirement is straightforward enough—written notice, written acknowledgement. It will require changes to offer letters and hiring documentation, and incrementally increase the record-keeping burden on businesses. That said, on its face, it is a rather innocuous change, not substantively altering employee rights or benefits, or employer obligations.
The question then is, “Why? What is the reason for this new language?” According to the Purpose section of the bill that became this new law: “The bill would allow workers to determine whether their paychecks properly reflect the hourly wage rates their employers agreed to at the time of hiring, including the proper overtime rate.” As elaborated by the bill’s Statement in Support, there’s concern that workers may have difficulty calculating their overtime rate from their paychecks. (Of course, if an employee knows the hourly rate—which employers were already required to divulge—it is not too difficult to determine the overtime rate.)
However, the most significant legislative language—and the best clue to what this new requirement is really about—can also be found in the Statement in Support: “This new requirement will allow both the employee and the commissioner of Labor to compute the overtime rate to which the employee is entitled.” [Emphasis added]
If the documentation is for the Commissioner’s benefit as well, employers should expect that the Commissioner will in fact make use of it. We expect that use to be holding employers’ metaphorical feet to the fire to make sure that they are properly paying overtime wages—and properly classifying those who are entitled to overtime pay. If you look at the constellation of changes together—
- provide written notice, including explicit notice of the fact that an employee is eligible for overtime pay and what the overtime rate is;
- obtain written acknowledgement of receipt from the employee, which will help make sure that the employee reads and processes the information; and
- create a single, easily reviewed document of what employees should be paid,
—the net effect will likely be to increase the number of claims for not paying overtime properly and to facilitate enforcement of the wage rules by the NYS Department of Labor. Since employees will be more cognizant of when they potentially should receive overtime, they are apt to bring more complaints and when they do, there will be unequivocal documentation of the overtime rate they are supposed to receive (or of the fact that the employer improperly failed to designate the employee as entitled to overtime pay).
This new rule seems motivated by a perception or fear that employers are not honoring their wage and hour obligations. (Given the state of the economy, it is probably not unreasonable to think that some cash-strapped companies might improperly seek to avoid paying overtime wages.)
The bottom line for employers is that they need to be more careful than ever to properly classify their employees with regard to their eligibility for overtime pay and to properly pay overtime wages. Employers should expect that there will be more enforcement actions taken in response to overtime pay violations or complaints, and that employees themselves will be more conscious of their right to overtime pay and more proactive in demanding it. It is likely that an employer’s failure to specify an overtime rate on a hiring document will be used (in conjunction with a failure to pay overtime wages) as an employer’s knowing intention to violate the wage laws, leading to increased fines and penalties.
New York seems to be in the forefront of increasing overtime enforcement through such documentation. Many other states, such as nearby Delaware, have wage notice requirements like NY’s previous one limited to notifying employees of their base rate of pay. The new requirements for explicitly listing the overtime rate and obtaining written acknowledgement of receipt from employees do not seem to have yet percolated generally through the states.
