Last-Minute Budget Change Could Weaken Workers’ Claims to Weekly Pay

With the New York state budget nearly completed, lawmakers this week have been negotiating a last-minute proposal to drastically lower penalties for employers that illegally fail to pay their workers weekly.

A longstanding state law requires employers to pay “manual workers” — who spend at least 25 percent of their time engaged in physical labor — every week, rather than every other. The law can benefit workers who live paycheck to paycheck and might face an unexpected expense.

In recent years, trial lawyers have filed hundreds of lawsuits against businesses for violating the law. In some instances, business owners argue they did not know their employees were classified as “manual workers.” Depending on the size of a business, penalties for a first violation can be millions of dollars.

The law itself is not under negotiation. But under a proposal from Governor Kathy Hochul, businesses that break it would see their legal liability go down. After initial resistance from the legislature, the governor has in recent days pushed a revised version of her plan, and as of Wednesday, it was in late-stage negotiations between Hochul and legislative leaders. Whether any form of the proposal will be included in the final state budget agreement was not clear early Thursday.

The measure “got snuck in two days ago,” Queens Senator Jessica Ramos, chair of the Senate Labor Committee, told New York Focus on Thursday morning. She said that it was “disappointing that such consequential labor law is being negotiated in the dark — especially because it impacts such a vulnerable and growing vulnerable population,” including migrant workers. But there is still a “fighting chance” that opponents would block the measure from the final agreement, she said.

While employees have long been allowed to sue over illegally withheld wages, for more than a century, they could not seek the same damages for violations of the weekly pay law. In 2019, a state appellate court ruling changed that.

Now, if an employer cannot show it made a “good faith” effort to comply with the weekly pay law, a court can award an employee up to the entire amount of their untimely paychecks in liquidated damages — essentially, compensation for the harm incurred by the late payment. In some cases, when the worker was ultimately paid in full but still late, the standard allows employees to collect each late payment twice.

On January 17, a different appellate court ruled the opposite: Employees do not have the right to seek liquidated damages for violation of the weekly pay law.

The New York Court of Appeals would likely have to resolve the two courts’ differences. But that may not be necessary if Hochul’s proposal becomes law.

On the same day in January, Hochul unveiled a budget proposal that would enshrine the second ruling’s standard in state legislation: Businesses would not be subject to liquidated damages as long as they paid employees at least twice a month. According to the National Federation of Independent Business, which advocates for small business owners, a worker could still sue to force their employer to pay weekly, but employers who failed to do so would no longer be subject to the current damage structure. The Department of Labor can also take action to enforce the weekly pay law.

In a January memo explaining its support for the proposal, the Hochul administration wrote that weekly pay lawsuits were “increasing in frequency against large and small businesses and resulting in large payouts for workers and plaintiffs’ attorneys, causing some employers serious financial harm.”

Hochul’s proposal could benefit large corporations — such Regeneron Pharmaceuticals, Walmart, Apple, Petco, and AMC Theatres — that have faced class action lawsuits arguing that they’ve violated the weekly paycheck law. Some trial lawyers are concerned that the plan would essentially nullify pending cases filed against those corporations on behalf of thousands of New York workers.

The state Retail Council and the National Federation of Independent Business have lobbied in favor of Hochul’s proposal, according to state lobbying records. While trial lawyers frame this as a battle between workers and large corporations, the business groups note that many smaller companies have also faced litigation.

In a 2022 court filing, an attorney representing the business federation stated that over the previous three years, 150 weekly pay lawsuits had been brought in New York, including against Nuccio’s Bakery in Brooklyn, Tu Casa Restaurant in Queens, and the Parents Association of Yeshiva & Mesifta Torah Vodaath Inc. in Brooklyn.

Ashley Ranslow, New York state director for the business federation, said trial lawyers are taking advantage of ambiguity in state law about who should be designated a “manual worker.”

“It’s gotten to a point where the plaintiffs’ attorneys argue that physical labor could be as simple as standing on your feet,” Ranslow said. “So if 25 percent of the time, I’m standing on my feet, I could charge that I’m a manual worker. Some of these cases have taken businesses by surprise, because they just legitimately did not think that they had manual workers.” Ranslow said her organization has pressed the legislature to clarify the language defining a “manual worker,” which is more than a century old, but has gotten nowhere.

Ranslow provided New York Focus with data showing that at least 191 cases against businesses have been settled since 2019. Small businesses “can’t afford to lose a multimillion-dollar lawsuit,” she said. “So they say, ‘All right, I’ll settle with you for $200,000.’ But that’s not okay, either. $200,000 is a huge, huge sum for a small business owner.”

Only businesses with at least 1,000 employees in New York can apply for a government waiver from the weekly pay law, according to the state Department of Labor.

The state’s umbrella labor organization, the AFL-CIO, has lobbied against Hochul’s proposal. Opponents of the governor’s push say the penalty for noncompliance would become so minor that corporations would simply flout it.

“We have a lot of fairly strong laws on the books in New York, but they’re only as strong as the enforcement mechanisms,” said Maureen Hussain, legal director at Worker Justice Center of New York, which advocates on behalf of low-wage workers.

Enforcement of the weekly pay law through the threat of damages is a crucial worker protection, Hussain said, and workers paid less frequently may not notice irregularities in their paychecks. “So my fear is that these proposed changes could enable a lot more wage theft to go unnoticed, and then unreported and not vindicated in court,” she said.

Longtime Albany lobbyist Kenneth Riddett has also been pushing against Hochul’s proposal. He represents the major litigation firm Bursor & Fisher, whose website says it’s had “significant success in recovering money for employees who were illegally paid on a bi-weekly basis.” Riddett also lobbies for the state’s influential Trial Lawyers Association, which circulated a memo in opposition to Hochul’s proposal.

Both the Assembly and Senate declined to include Hochul’s proposal in their one-house budget resolutions. In recent days, the governor’s office came back with a revised proposal, now the subject of this week’s late-stage negotiations.

Hochul’s revision is said to include a two-tiered system. If found liable for a first offense in court, an employer would pay interest on the delayed wages, at a rate capped at 16 percent by state banking law. For a second offense, an employer could be held liable for 300 percent of lost interest.

This week, the Senate made a counterproposal that would increase the penalty for a third offense: Businesses could be liable to pay the full liquidated damages, according to a copy of the proposal obtained by New York Focus. This would essentially give employees the rights they have now, but only after their employer was found liable for two violations in court.

Some in the Assembly are pushing to allow employees to recoup liquidated damages after a second proven offense, not a third, according to a person with knowledge of the matter.

All those proposals would require employees to bring repeated, successful litigation against their employers. Trial lawyers argue that, practically speaking, workers would never get the opportunity to file repeated lawsuits.

For low-wage workers, hiring a lawyer to bring their individual case would become difficult, since the payout for a first offense would be minor. Many low-wage workers cannot afford to pay a lawyer by the hour, so attorneys typically take on these cases based on a contingency fee — taking a percentage of the damages won through a court award or settlement.

Class action lawsuits can generate greater pay for plaintiff’s attorneys, but those seeking liquidated damages must be brought in federal court, where the potential damages must total at least $5 million. Given the low dollar amounts at stake for a first offense, bringing a class action lawsuit over weekly pay might become impossible.

Ramos expressed hope that because the issue does not carry fiscal implications for the state government, it will be left out of the final budget agreement.

“We were successful in keeping it out of the one-house budgets,” Ramos said.

“Where I come from, usually two out of three is a majority. But for some reason, this is rearing its ugly head again,” she said. “And it’s disappointing to see the governor’s insistence on defending multinational corporations that want to displace workers.”

As of Thursday, the issue remains in play. The first budget bills were printed on Wednesday night, but the arrival of the Education, Labor, Housing and Family Assistance bill, where Hochul first made the proposal, is uncertain.

Arabella Saunders contributed reporting.