BILL NUMBER: S858

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 completely and without
exception prohibits lack of distribution of earned wages.

 
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 supple-
ments.

Section 5 provides that this act shall take effect immediately.

 
JUSTIFICATION:

Article 6 of the Labor Law was created to prevent employers from bene-
fiting 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 paystub 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 thisliarrow definition
of a "deduction." As attorney Scott Lucas outlines in his article "Does
New York's Wage Payment Law Have a Gaping Loophole?" (New York State Bar
Association Labor and Employment Law Journal, Vol. 41, No.1, Fall 2016),
an employer could withhold wages but simply fail to note the deduction
on a paystub.  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 an employee asserting a common-law contract claim but not
alleging a violation of any substantive provision of Article 6 was not
eligible to collect attorney's fees under Section 198, the part of the
Labor Law dealing with penalties and recovery actions. The court held in
Gottlieb that Section 198 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 supplements 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 completely misinterpreted this part of Section 198. 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 real-
ize that the rights-affirming 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 loop-
hole.

This loophole is not merely a topic for law journal articles.  Attorneys
representing laborer plaintiffs speak of real-life cases where plain-
tiffs are deprived of their earned wages, and then deprived of a remedy
under the Labor Law by courts that misread the law.

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:

2020: S5777 - Passed Senate, died in Assembly
2020: S5777 - Referred to Labor

 
FISCAL IMPLICATIONS:

None

 
EFFECTIVE DATE:
Immediately