BILL NUMBER: S5777

SPONSOR: GOUNARDES
 
TITLE OF BILL:  An act to amend the labor law, in relation to wage
theft

 
PURPOSE OR GENERAL IDEA OF BILL:

To clarify that Article 6 of New York's Labor Law prohibits wage theft
without exception.

 
SUMMARY OF PROVISIONS:

Section 1 of the bill outlines the legislature's finding that different
sections of Article 6 of New York's Labor Law must be amended to clarify
that wage theft remains illegal without exception.

Section 2 establishes that this act shall be known as the "No Wage Theft
Loophole Act."

Section 3 provides that there is no exception to liability under
              

Section 193 of the Labor Law for failure to pay wages.

Section 4 provides that there is no exception to liability under

Section 198 of the Labor Law for failure to pay wages, benefits or wage
supplements.

Section 5 provides that this act shall take effect immediately.

 
JUSTIFICATION:

Article 6 of the Labor Law was created to prevent employers from bene-
fitting from the fruits of their employees' labor by withholding wages.
If interpreted correctly, this broad-ranging statute allows prevailing
plaintiffs to recover unpaid wages, attorney's fees, and in many cases
liquidated damages.

To the detriment of employees everywhere, however, the statute is often
interpreted extremely narrowly by courts who misconstrue or overlook its
rights-affirming language. Section 193 of the Labor Law prohibits any
deductions from wages unless the deduction is expressly authorized by
the employee in writing and for his or her own benefit. While this
language seems clear enough on its face to ward against any wage theft,
much confusion has arisen over the term "deduction" and what this could
possibly represent.

For many of us, "deduction" calls to mind a literal notation on a pays-
tub of wages subtracted, which leads to the question: what if the wage
theft is not denoted by a line on a paystub? One can imagine a whole
host of scenarios, for example, which clearly violate the intent of
Section 193 without conforming to this narrow definition of a
"deduction." An employer could withhold wages but simply fail to note
the deduction on a paystub, for example. Alternatively, an employer
could deny the existence of the full amount of wages owed and claim that
the employee's paycheck that month was a discretionary amount that the
employer decided based on the quality of the employee's work. Or, an
employer could choose to withhold the pay entirely, as the statute
simply prohibits "ANY" deduction. But does "any" mean "all"? What if the
statute does not prohibit the withholding of an entire paycheck?

While it may seem obvious that a "deduction" in the context of wage
theft is meant to imply the taking of wages, case law on the provisions
of Article 6 has painted a much more nuanced and confusing picture. In
Gottlieb v. Kenneth D. Laub & Co, for example, the Court of Appeals
concluded that Section 198, the part of the Labor Law dealing with
penalties and recovery actions, was not "substantive."  Because of this
court ruling, the legislature then amended Section 198 as part of the
Unpaid Wages Prohibition Act in 1997 to declare that "all employees
shall have the right to recover full wages, benefits and wage supple-
ments accrued during the six years previous to the commencing of such
action."

While it seems the meaning of this provision could hardly be plainer,
there was then a later court decision (Malinowski v. Wall Street Source,
Inc.) which confused the issue further. The court in Malinowski cited
Gottlieb in its ruling, believing that the current language of Section
198 was in place at the time of the Gottlieb ruling and thus did not
really mean anything. The court failed to realize that the rights-af-
firming language of Section 198 was added post-Gottlieb precisely
BECAUSE of Gottlieb. Subsequent courts have ruled in similar ways to
reinforce the misled notion that Section 198 does not uphold the right
of recovery for full wages. New York's Labor Law, then, which should be
a model for the rest of the nation in its defense of employee rights,
finds itself watered down by a judicially created loophole.

It is thus necessary for the legislature to close this judicially-creat-
ed loophole once and for all to clarify that employees must be paid what
they are owed, no matter what. Doing so will help defend the rights of
all employees, including low-income employees who are more likely to be
subject to wage theft. New York cannot in good faith claim to be one of
the most progressive states in the nation when it comes to labor rights
if we fail to clarify that wage theft is, and has always been, complete-
ly prohibited within our boundaries.

 
PRIOR LEGISLATIVE HISTORY:

New bill

 
FISCAL IMPLICATIONS:

None

 
EFFECTIVE DATE:
Immediately