By Ty Hyderally, Esq and Lorena Meza

September 3, 2024

The legal framework governing labor relations is complex, and deciphering it can be quite challenging. However, it is important to note how the term “remuneration” is interpreted under the New York Consolidated Laws, Labor Law § 517. This section gives a clear picture of what is meant by compensation at the workplace while at the same time being legal and business oriented.  New York Labor Law § 517 is broad in its definition of “remuneration” and includes every conceivable thing that an employee can be paid by an employer. This entails wages, salaries, commissions, bonuses, and reasonable monetary equivalent of other benefits like board, lodging or housing.  Consider an employee who is paid $ 60,000 per annum but is also provided with a house by the company, which costs $ 1,200 per month. According to §517, the value of this housing benefit is taken into account as part of their total remuneration, which means that their total compensation is $74,400.

The law also takes into consideration tips that are given to employees since they are not directly paid by the employer but are part of the working environment. For instance, a restaurant server who receives $150 in tips during a week will have to add this amount in figuring out what  their total remuneration package is which is then used to determine employment compensation. This inclusion ensures that all forms of remuneration are captured, whether they are direct remuneration or indirect remuneration.  Nevertheless, not all payments can be considered as remuneration under this law. Some of them are categorically barred from being granted to employees. Any payment made under the plan that the employer establishes for the purpose of insurance or for the purpose of providing retirement benefits does not form part of the remuneration. For instance, an employer’s payment to an employee’s 401(k) plan or health insurance premiums is not considered as remuneration to the employee. This exclusion is made with the understanding that such contribution is a different form of income from that earned by employees.

Likewise, payments made under the Federal Insurance Contributions Act (FICA) tax are also not allowed. These are taxes that are paid to the government through which employers make deductions for their employees (The New York State Senate, 2014). For instance, if an employer contributes $3,000 to the FICA taxes, this amount is not included in the remuneration of the employee. The law also does not consider retirement pay and long-term sickness or disability pay that were paid after the last employment month and more than six months after that. This helps exclude retirement and long-term benefits from the current remuneration.  Exemptions also include payments made from certain tax-exempt trusts or annuity plans. If an employee gets distributions from a trust fund created for retirement, such payments are not considered remuneration if they are not earned as wages. Also, any other expense incurred other than cash compensation for services that are not related to the employer’s trade or business is not allowed. For instance, if an employee is awarded stock options as part of their remuneration outside their employment contract, then these options may not be considered as remuneration.

Finally, payments made to employees after attaining the age of 65 years, where the employee did not work during the period for which the payment is made, are also not allowed. This provision helps to clearly distinguish between retirement benefits and current remuneration. Also, the dismissal or severance payments are not included in the remuneration as it is understood that such payments are made in reaction to termination and not as part of normal remuneration.  It is important to understand these differences in order to maintain proper and fair control of compensation between employees and employers. New York Labor Law § 517 was enacted to establish a clear and understandable system of how compensation is to be reported and what is considered remuneration and what is not.

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