Real World Impact: Many New York employers facing substantial liability arising from class actions alleging pay frequency violations of New York Labor Law Section 198 now have relief. Governor Hochul recently signed into law as part of a budget bill an amendment to the Labor Law that effectively eliminates the availability of liquidated damages against most employers that failed to pay their manual workers on a weekly basis.
The Amendment
Liquidated damages are generally no longer recoverable in current and new lawsuits premised on paying manual workers on an at least semi-monthly basis but less than the weekly basis required by law. This is a massive reduction since prior interpretations of the Labor Law entitled manual workers to recover liquidated damages up to the amount of any wages that were not paid on a weekly basis for a period of up to 6 years. To illustrate, before the amendment, an employer that had been paying 100 manual workers $50,000 per year on a bi-weekly payroll for at least 6 years before being sued, could be liable in liquidated damages worth $25,000 x 6 years x 100 manual workers = $15,000,000. Of course, this is a devastating amount of liability even though the employees received every penny earned just not during the week they earned it. The amendment now eliminates this pitfall even for employers defending lawsuits that were commenced prior to the effective date of the amendment.
Important Caveats
While a mere fraction of the costs potentially imposed by liquidated damages, employers excused from liquidated damages under the amendment are instead liable for daily interest (from an annual rate currently set at 16 percent) during the delay in pay.
Furthermore, liquidated damages are still recoverable against employers that are repeat violators, i.e., where the employer was previously found to have violated manual worker pay frequency requirements and is now in a pending or new lawsuit for doing so again.
The liquidated damages exclusion does not apply to employers with less frequent than semi-monthly payrolls.
Finally, of course, employers are still required to pay manual workers on a weekly basis and, if they do not, can still incur liability.