By Erica M. Clifford, Esq.
The long-awaited decision of the New York Appellate Division’s Second Department in Grant v. Global Aircraft Dispatch was entered on January 17, 2024, and it’s a win for New York employers. At issue was whether an employee considered to be a manual worker could sue her employer in court and recover liquidated damages for an alleged violation of the state’s pay frequency law.
New York Labor Laws at Issue
New York Labor Law 191(a) provides that all employees who are considered “manual workers” must be paid on a weekly, rather than bi-weekly basis. A manual worker, as described in the statute, is “a mechanic, workingman or laborer”, and though not explicitly in the language of the statute, New York courts and the Department of Labor have interpreted the term “manual worker” to include all employees who spend at least 25% of their time performing physical tasks.
The sole remedy previously available for violations of this statute governing pay frequency were actions brought by the Commissioner of Labor. These actions were treated as non-wage claims, carrying civil penalties of between $1000-$3000.
By contrast, wage claims – an employer’s failure to pay an employee’s full wages – were considered by the State Legislature to be more egregious violations and were subject to the enforcement mechanism outlined in NYLL 198, first enacted in 1967.
Section 198 provides that an employee is entitled “to recover the full amount of any underpayment”, as well as attorneys’ fees, prejudgment interest, and “an additional amount as liquidated damages equal to one hundred percent of the total amount of the wages found to be due.”
From 1967 to 2019, NYLL 198 was interpreted by its express language, and its enforcement provisions were limited to employees’ claims for underpayment of wages. The most common circumstances pertaining to violations of Sec. 198 were an employer’s failure to pay overtime, failure to pay minimum wage, and other instances where employees did not receive their full pay. Claims related solely to the frequency of payments were not considered to be included in this enforcement scheme.
The First Department’s Bombshell Decision in Vega v. C.M. & Assoc. Construction Mgmt
Then, in September 2019, the Appellate Division, First Department issued a decision in Vega v. CM & Assoc. Construction Mgmt, finding that those employees considered to be manual workers under 191 could sue their employers under NYLL 198 if they were paid on a regular biweekly pay schedule, instead of paid weekly.
The Vega Court acknowledged that while Section 198 did not expressly refer to the frequency of pay but rather directly addressed wages that were not paid at all, the applicability to pay frequency was “implied.” To make this connection, the Vega Court reasoned that while manual workers received all compensation owed to them, the one-week delay in payment constituted an automatic underpayment, even though the employee’s full wages were paid after the second week. In other words, a recurring “violation and cure” of NYLL 198. Though the Vega plaintiffs acknowledged that they had been paid all wages owed, the Court found that these employees could pursue the equivalent of 50% of their full salaries, for each week they were purportedly paid late, as liquidated damages.
Predictably, the Vega decision resulted in a wave of class action lawsuits, brought on behalf of a wide range of employees claiming to be manual workers and paid on a biweekly schedule. The liquidated damages were “calculated as 50% of the employer’s entire New York state payroll for the 6-year statute of limitations period”, resulting in significant potential exposure for employers.
The Second Department Declines to Follow Vega
When a second manual worker pay frequency case was appealed to the Appellate Division in the Second Department in 2021, both sides anxiously awaited the Court’s decision. On January 17, 2024, the Grant v. Global Aircraft Dispatch, Inc. opinion was issued, and the Second Department declined to follow the First Department’s holding that employees could bring a private right of action for manual worker pay frequency claims.
The Grant court held that NYLL 198 does not expressly apply to the pay frequency claims in Sec. 191, and the Vega decision went too far in creating an “implied” right for these employees. The Grant Court found that if the Legislature had wanted to include pay frequency claims in the enforcement provision, the Legislature would have expressly done so.
The Grant court looked to the plain language of Sec.198, which provides for liquidated damages as “an additional amount” in clear contemplation of a recovery of underpayment of wages as “the primary, foundational remedy.” In other words, liquidated damages were clearly dependent upon the recovery of an underpayment, and in the absence of that underpayment or nonpayment, liquidated damages were not available as a remedy.
The Grant court held that the plain language of NYLL 198 treats claims for nonpayment and underpayment of wages as distinct from pay frequency claims, “and we do not agree that payment of full wages on the regular biweekly payday constitutes nonpayment or underpayment.”
Governor Hochul’s Proposed Amendment to Labor Law Impacting Pay Frequency Claims
On January 16, 2024, just one day before the Grant decision was issued, Governor Hochul announced the Executive Budget Proposal for the 2025 fiscal year, which includes language that would explicitly provide that “liquidated damages shall not be applicable to violations of section 191 where the employee was paid in accordance with the agreed terms of employment, but not less frequently than semi-monthly.”
The Governor’s recommendation is in clear alignment with the Grant decision and may signal an end to the pay frequency class action litigation based on the tenuous “implied” right. The Budget Proposal is now before the State Legislature for review.
Takeaway for New York Employers
While the decision in Grant is a win for employers, the result is conflicting guidance in the State as to whether there is a private right of action available for pay frequency claims. The plaintiffs may take the case up to the Court of Appeals to resolve the split, however the inclusion of an amendment to Sec 198 in the Governor’s Budget Proposal could foreclose the issue of this “implied” right more expeditiously, were the Legislature to accept the proposal this year.
Taken collectively, it appears that the litigation trend of pay frequency class actions may be nearing its end, as both the Grant decision and the proposed amendment in the Governor’s Budget Proposal have signaled that Section 198 does not provide for a private right of action or liquidated damages for Sec 191 pay frequency claims.