New York Labor Law Amendments Expand Scope Of "Deductions" Claims

Published date21 September 2021
Subject MatterEmployment and HR, Employee Benefits & Compensation, Employee Rights/ Labour Relations
Law FirmProskauer Rose LLP
AuthorMr Allan Bloom

New York Governors seem to have a history of favoring employees with Labor Law giveaways as they check out of the Executive Mansion. (Remember the Wage Theft Prevention Act, signed by David Paterson days before he left office in December 2010?) On August 20, 2021, four days before his resignation took effect, former Governor Andrew Cuomo signed the "No Wage Theft Loophole Act" (the "Act"), which amended sections 193 and 198 of the Labor Law to state that "[t]here is no exception to liability [under those sections] for the unauthorized failure to pay wages, benefits, or wage supplements." The Act was intended to clarify that employees can bring ' 193 claims not only for unauthorized "line-item" deductions from wages but also for the wholesale withholding of wages alleged to be owed.

How We Got Here

Labor Law ' 193 prohibits a wide range of "deductions" from "wages," and ' 198 provides a civil right of action for a violation of ' 193. For years, litigants have debated whether the failure to pay wages at all'e.g., a bonus that was allegedly owed'constitutes a "deduction" for purposes of ' 193. Plaintiffs challenging the non-payment of compensation often invoked ' 193, arguing that the wholesale withholding of wages is tantamount to a "100% deduction" from wages. The alleged violation of ' 193 triggers a right to sue under ' 198(1-a), under which a prevailing plaintiff can recover not only the amounts unlawfully withheld but also attorneys' fees, prejudgment interest, and (absent good faith on the part of the employer) liquidated damages equal to 100% of the wages found to be due.

Employers have historically (and successfully) defended such claims on the ground that a wholesale withholding of compensation is not a "deduction" within the meaning of ' 193'an argument validated by many courts, including the Appellate Division in Perella Weinberg Partners LLC v. Kramer, 153 A.D.3d 443 (1st Dep't 2017). As explained by the lower court in Kramer, a "deduction" is "understood to [mean] a partial withholding of compensation" for a specific purpose. Other appellate courts have agreed, confirming that to state a claim for a violation of ' 193, a plaintiff must allege a specific deduction from wages, and not merely a failure to pay wages.

The distinction is meaningful, as the only other section of the Labor Law providing a substantive claim for non-payment of wages is ' 191, which excludes from its protection employees who work in administrative, executive, or...

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