If You Don't Pay Now, You May Pay A Lot More Later in New York

New York state is about to enact—assuming Governor Patterson signs the bill into law—the Wage Theft Protection Act.  As the name implies—Wage Theft—the pending law essentially treats underpayment of employees as a criminal act. While it doesn’t provide for jail time for managers or business owners who fail to pay minimum wage or overtime, it does establish severe monetary penalties. Under the Act, an employee who is underpaid wages can recover double what he or she is owed—so the unpaid wages plus the same amount again. In addition, if an employee sues and wins and the employer does not pay the money owed (wages plus the additional “liquidated damages” doubling the award) within 90 days, the employee can receive an extra 15% of the total judgment—so an extra 30% of the unpaid wages—plus attorneys fees and costs.

This law may be big trouble for employers. The additional money which an employee can recover may act as an incentive to bring lawsuits. Under the terms of the Act, even innocent mistakes can result in significant liability. And during a time of continuing economic weakness, if an employer simply can’t pay a large judgment in a timely fashion, the employer can then end up owing yet more money.

Adding to this is the interplay of this act with the federal Fair Labor Standards Act, or FLSA. The FLSA already allows employees suing for unpaid wages to receive double those wages in damages.  Since employees may sue under both state and federal law, a New York employee who sues for unpaid wages, such as unpaid overtime, could potentially collect triple wages (treble damages) in compensation.

The Act also adds other employee protections, such as enhanced protection for employees raising complaints about wage violations. If an employer retaliates against an employee for making such complaints, the employee can sue for reinstatement and “front pay,” or wages they haven’t earned yet, in addition to any back pay, or wages they lost due to being terminated. This potentially provides an incentive for employees who are having difficulty at work or are in conflict with their employer to raise such complaints in order to discourage their employer from taking action against them—or to recover compensation and seek reinstatement if the employer acts in a fashion that could be characterized as “retaliating” for the complaint.