By: Jennifer Weitz, Esq. and Ty Hyderally, Esq.

Long-sought-after legislation aimed at closing a judicially-created loophole was recently signed by former Governor Andrew Cuomo. Senate Bill 858 (substituted for the identical Assembly Bill 1893), known as the “No Wage Theft Loophole Act,” addresses an unintended gap in the law that allowed employers to legally withhold wages owed their employees. The Act was signed into law on August 20, 2021 and took effect immediately.

The bill, previously introduced in the 2019-2020 legislative session, clarifies that Article 6 of New York’s Labor Law completely and without exception prohibits lack of distribution of earned wages. If interpreted correctly, Article 6 allows a prevailing plaintiff to recover unpaid wages, in addition to attorney’s fees and, oftentimes, liquidated damages. In particular, 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. Despite seeming fairly straightforward, the phrase “any deduction” has proven confusing to the courts, which has in turn benefitted unscrupulous employers. To give an obvious example, an employer could short an employee’s paycheck but fail to note the “deduction” on a paystub. Less obvious, but still legal, would be the employer who withholds the entire pay owed, since the statute prohibits “any” deduction but is silent in regard to withholding an entire paycheck. In various opinions, courts have reinforced the notion that Section 198 does not uphold the right of recovery for full wages, which in real life has translated into plaintiffs who are deprived of their earned wages and then deprived of a remedy under the Labor Law due to this persistent misreading.

In an effort to address this dismaying trend, the Legislature first 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.” However, even this language was improperly construed, adding to a body of law that failed to recognize the right of recovery for full wages. From 1998 until the current legislation was signed, New York courts heard over 4,000 cases involving wage theft.

The New York State Legislature acted to finally address this loophole and clarify that employees must be paid what they are owed, no matter what. An identical bill had passed the State Senate in 2020 but died in the Assembly, but this time around the bill passed the Assembly 138-10, and the Senate 51-12. The Act amends Section 193 with new language added to subdivision 3, and the creation of new subdivision 5, as follows: “There is no exception to liability under this section for the unauthorized failure to pay wages, benefits or wage supplements.”

With this new legislation, all employees in the state of New York now have a comprehensive law that categorically prohibits employers from paying anything less than the full wages those workers have earned from their employment.

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