Wage and Hour Law Update : Wage & Hour Lawyer & Attorney : Jackson Lewis Law Firm : Minimum Wage, Overtime & Service Contracts

Employers with New York State operations must ensure they understand the New York State Department of Labor's current position as to new hire notices and wage deductions.

New Hire Notices

As previously reported here, since October 26, 2009, New York state employers have been obligated to notify all new hires in writing of their hourly rate, overtime rate (if applicable) and payday, and receive a written acknowledgment of such notification.  The Department has issued model forms for various types of pay structures, all of which can be found on the Department's website, but continues to advise employers that use of the model forms is not mandatory.   One of the Department's model forms is directed to new hires the employer intends to treat as exempt employees, and both the form and its accompanying instructions require employers to list the exemption applicable to such employees.  However, this form and its accompanying instructions were not fully consistent with the general guidelines for compliance, also posted by the Department on its website.  Such guidelines simply stated that the exemption “should” be listed; it did not make doing so mandatory.  

Recently, the Department modified its general guidelines and now consistently advises that the exemption must be listed for exempt employees on the new hire notice.  In order to comply with the Department’s position, employers must ensure they carefully analyze the appropriate exemption(s) prior to listing them on any notice to ensure such statement is accurate.   It is important to note however that this new directive goes beyond the statutory requirement contained in Section 195 of the Labor Law, although the statute does provide the Department with the right to issue "requirements as to content and form."  

Wage Deductions

In addition to permitting deductions "in accordance with the provisions of any law or any rule or regulation issued by any governmental agency", Section 193 of the Labor Law permits deductions "for the benefit of employee" as long as such deductions are authorized in writing.   Over the years, the Department, through opinion letters, has advised that this language permits deductions for various issues (such as wage overpayments and repayment of loans) as long as the employer obtained written consent and limited such deduction to 10% of gross wages for the payroll period. 

However, since 2006, based on New York State Court of Appeals’ decision in Angello v. Labor Ready, the Department has consistently narrowed its interpretation of the phrase “for the benefit of the employee.”   For example, in a 2007 opinion letter, the Department stated that in order for a deduction “for the benefit of the employee” to be permissible it must be  a deduction which benefits the employee which is also similar to those enumerated in the statute (i.e., insurance premiums, pension or health and welfare benefits, contributions to charitable organizations, payments for United States bonds, payments for dues or assessments to a labor organization). Thereafter, through opinion letters, the Department modified its prior position as to the legality of certain wage deductions, such as a deduction from a final paycheck to cover used but unaccrued paid time off, and deductions for loan repayments and wage overpayments. The Department now states that such deductions are impermissible regardless of the employee's written consent.  Based on the Department's consistently evolving, highly-protectionist pro-employee position, employers should carefully review their wage deduction practices in New York State.

Every business with New York operations should review these wage and hour compliance issues with counsel to ensure compliance.

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As previously reported in detail here, in November 2009 then-New York Commissioner of Labor Patricia Smith issued an Order accepting the 2009 Restaurant and Hotel Industry Wage Board’s recommendation to consolidate and modify the Wage Orders currently in effect covering New York restaurant and hotel industry employers. The Department however has yet to issue the proposed text of the consolidated Order which, if enacted, would both impose additional obligations on covered New York employers, as well as provide such employers with additional rights and protections, such as:

• Requiring employers to notify affected employees when taking a “tip credit” under the New York Labor Law (the “Labor Law”);
   
• Requiring an additional hour of pay to be provided to all non-exempt employees whose workday is over 10 hours  (the “spread of hours” requirement) regardless of the hourly wage earned by such employees;
   
• Permitting employers to mandate “tip pooling” under the Labor Law – at present, employers may mandate “tip sharing” (where a tipped employees shares his or her tips with supporting customarily tipped employees, such as busboys) but a tip pool, wherein all tips received are pooled and redistributed amongst customarily tipped employees, must be voluntarily; and
   
• Providing a “wash and wear” exemption to an employer’s obligation to provide a laundry cleaning allowance for mandated “uniforms.”

The Department of Labor’s next step is to submit the proposed Order to the State Register for a 45-day public comment period.

Given this uncompleted, mandatory legislative step, and the potential for public comment leading to further discussion and/or revision, it is unclear when a consolidated Order will take effect. However, it is likely that practices will not need be modified until at the earliest well into Summer 2010. We will continue to monitor the status of the Order and provide updates.

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Business owners, supervisors and managers performing services for corporate entities often believe that liability for wage and hour violations can be imposed solely on the incorporated entity.  To the contrary, as demonstrated by a recent New York Federal Court decision, various theories support individual liability under both federal and, in this case, New York State law.

In Flannigan v. Vulcan Power Group, L.L.C., 2010 U.S. Dist. LEXIS 41751 at * 10-13 (S.D.N.Y. Apr. 27, 2010), Judge Barbara Jones considered a motion to dismiss wage and hour claims brought against an officer/manager.In denying the motion, the court explained that corporate officers and principal shareholders, as well as supervisors and managers involved in wage and hour policymaking/decision-making, can be personally liable for unpaid wages under federal and state law.  Id. The Court cited Plaintiff’s allegations and documentary evidence to the effect that the individual defendant had met with her regarding the terms of her employment, and subsequently communicated with her about the status of her commission compensation, as sufficient to allege individual liability under the FLSA and New York law. Id. The court did however find that individual liability could not be imposed on the corporate shareholders under Section 630 of the New York Business Corporation Law because the defendant corporation was not incorporated in New York. Id.  Under BCL § 630, the ten largest shareholders of a closely held New York corporation are liable for unpaid wages and benefits.

Business owners (as well as supervisors and managers involved in wage and hour policymaking/decision-making) must recognize the various theories under which they can be subject to personal liability and of course take actions to minimize such potential liabilities. 

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