Small Business: The Wage Theft Prevention Act May Steal Some Profitable Time Keeping Efforts

March 7, 2011

By Philip I. Frankel, Small-Biz Focus, March/April 2011

On December 13, 2010, former New York Governor David Patterson signed into law the Wage Theft Prevention Act, which is effective April 9, 2011. The Act, among other things, imposes new disclosure and recordkeeping requirements on employers, increases penalties for wage law violations, and strengthens laws prohibiting employers from retaliating against employees. No employer should ignore these new laws.

Disclosure, Recordkeeping, and Retention Requirements

The Act expands the written notice ("Notice") employers are required to provide employees about their pay at the time of hire and annually thereafter. Employers must disclose to employees their wage rate and the basis for it (for example, hourly or salary), their regular pay dates, their overtime rate, any minimum wage allowances (for example, meals or lodging), the employer's contact information, and any other information the Department of Labor may deem "material and necessary." The Notice must be in English and in each employee's primary language. Further, the employer must obtain each employee's signed acknowledgement that they received the Notice. Employers must retain the Notice and payroll records for at least six years. If employers want to change any Notice-related pay practices, a new Notice must be provided at least seven days beforehand, unless the changes are already reflected on employees' paystubs. The new law also requires that paystubs include more detailed wage information, including allowances, the rate and basis for regular and overtime pay, and the dates the wage covers.

Increased Penalties and Remedies

The Act significantly increases employers' liability for labor law violations under the Act. Employees may file a civil lawsuit against employers who violate the Notice or paystub requirements and recover damages, attorney's fees, and costs. The Department of Labor may also bring a civil action and assess penalties of up to $100 per week. For failing to properly maintain payroll records, any type of corporation's "officers and agents" could face criminal liability.

The new law also greatly expands the penalties if employers fail to pay wages or benefits. Previously, employees could only recover the underpaid amount, attorneys fees, costs, and liquidated damages of 25% of the wages owed. Under the new law, liquidated damages are elevated to 100% of the wages owed, and employees may additionally recover prejudgment interest.

Anti-Retaliation Protection

The Act further protects employees that face employer retaliation after they complained about a labor law violation. The Labor Commissioner will have the power to, among other things, award liquidated damages of $10,000 (along with attorney's fees and costs) and award pay instead of reinstatement. Employees may also file a civil lawsuit for unlawful retaliation, which is a class B misdemeanor.

Due to these serious consequences, employers must review their payroll practices to ensure they comply with the Act's requirements.