Enhanced Wage and Recordkeeping Requirements for NY Employers

Significant changes in the New York Labor Law (“NYLL”) take effect on April 9, 2011 and New York employers should be prepared. The changes are pursuant to a law dubbed the “New York Wage Theft Prevention Act.” The changes in the law that will have the most immediate impact on employers are those that provide for enhanced wage notice requirements, enhanced wage statement requirements and enhanced record keeping requirements. To some extent, these requirements have been in place since October 2009. Effective April 9, however, the requirements are likely to become a more prominent fixture on the human resources landscape for New York employers. Perhaps the most significant aspect of the new law is that employers will now be required to provide annual notices to all employees concerning wages.

The purpose of this client alert is to provide an overview of (i) the enhanced wage notice required at the commencement of employment and annually, (ii) the acknowledgment that employees must sign confirming their receipt of wage notices, (iii) the additional notice required to inform employees if any changes are made with respect to information set forth in the wage notices, (iv) the enhanced requirements for wage statements (i.e., pay stubs), (v) enhanced recordkeeping requirements and (vi) the enhanced penalty and enforcement mechanisms pertaining to wage payment violations and violations of the enhanced notice requirements.

Wage Notice at the Commencement of Employment and Annually

Effective April 9, the NYLL will require every employer to provide written wage notices to employees both (i) at the time of hire and (ii) annually on or before February 1 of each year. The notices must be provided to each employee, regardless of whether they are exempt or non-exempt, part-time or full-time. The notices must contain the following information:

• Rate(s) of pay
• The basis of payment (i.e., whether paid by the hour, shift, day, week, salary, piece, commission or other method)
• Allowances, if any, claimed as part of the minimum wage (e.g., tip, meal or lodging allowances)
• For employees subject to overtime (i.e., non-exempt), the regular hourly rate of pay and the overtime rate of pay
• The regular payday designated by the employer¹
• The name of the employer
• Any “doing business as” names used by the employer
• The physical address of the employer’s main office or principal place of business, and a mailing address if different
• The telephone number of the employer
• Such other information as the Commissioner of Labor deems material and necessary²

The notices must be provided in English and in the language identified by each employee as the employee’s primary language at the time of hiring.³

The law directs the Commissioner of Labor to prepare templates for the notices. As of this writing, the Commissioner of Labor has not yet posted the notices that comply with the law that will become effective on April 9, 2011. It is anticipated that the notices will be available sometime prior to April 9 and will be available online at www.labor.ny.gov.

Acknowledgement

Each time an employer provides a notice (whether it is a new-hire notice or an annual notice), the employer must obtain from each employee a signed and dated written acknowledgement of receipt. Like the notice itself, the acknowledgement must be in English and the primary language of the employee. Moreover, the acknowledgement must contain an affirmation by the employee that the employee accurately identified his or her primary language to the employer and that the notice was in the language identified. Further, the acknowledgement must also conform to any additional requirements established by the Commissioner of Labor regarding content and form.

As with the notices, the law directs the Commissioner of Labor to prepare templates for the acknowledgement. If the Department of Labor’s past practice is any indication, it is likely that the acknowledgement will be a part of the notice template.

Employers must retain signed acknowledgement forms for at least six years.

Notice of Changes

The law requires employers to notify employees of changes to any of the information required in the wage notice. This could involve either individual changes such as changes in salary or pay rate. Alternatively, this could involve company-wide changes such as a change in the employer’s address. The notice of change must be in writing and must be given at least seven calendar days prior to change.⁴ While not explicitly required, prudence dictates that the most effective means of providing a notice of change is to provide a new notice on the template provided by the Commissioner of Labor. Employers should also obtain signed acknowledgements of the change notices.

Wage Statements

The law imposes new requirements as to what must be included on wage statements (i.e., pay stubs) that must accompany every payment of wages. Where applicable, employers should coordinate with their payroll processors to ensure that wage statements distributed after April 9, 2011 (or pertaining to work performed after April 9, 2011) comply with the new law. Wage statements must include the following:

• The dates of work covered by that payment of wages
• The name of the employee
• The name of the employer
• The address and phone number of the employer
• Rate(s) of pay
• The basis of payment (i.e., whether paid by the hour, shift, day, week, salary, piece, commission or other method)
• Gross wages
• Deductions
• Allowances (if any) claimed as part of the minimum wage
• Net wages

In addition, for all employees who are subject to overtime compensation (i.e., non-exempt), the following must be provided:

• The regular hourly rate(s) of pay
• The overtime rate(s) of pay
• The number of regular hours worked
• The number of overtime hours worked

For employees who are paid on a piece rate, the wage statement must include the applicable piece rate(s) and the number of pieces completed at each rate.

Finally, upon request of an employee, the employer must furnish a written explanation of how the wages were computed.

Record Keeping Requirements

The recent changes to the NYLL expand the duration that employers are required to maintain payroll records to six years. (Previously employers were required to maintain payroll records for three years.) The payroll records must show, for each week worked, the same information as that which is required to be included on wage statements.

Penalties and Enforcement Mechanism

The Wage Theft Prevention Act increases penalties for wage payment violations under the NYLL. Potential civil penalties for wage payment violations include liquidated damages of 100% of the total amount of wages found to be due. (Under the previous version of the law, liquidated damages were 25%.) In addition to compensatory and liquidated damages, employees may recover attorneys’ fees and pre-judgment interest at the statutory rate (currently 9% per annum).

In the event an employer fails to provide the wage notice described above within 10 business days of an employee’s first day of employment, the employer may be liable for damages of $50 for each work week that the employer is in violation, up to a total of $2,500 plus costs and attorneys’ fees.

In the event an employer fails to provide wage statements with required information described above, the employer may be liable for damages of $50 for each work week of the violation, up to a total of $2,500 plus costs and attorneys’ fees.

In a civil lawsuit seeking damages for the above violations, an additional 15% penalty is assessed if the employer fails to pay an adverse judgment within 90 days after the judgment or 90 days after the expiration of time to appeal (whichever is later).

An action seeking damages for a wage payment violation, a wage notice violation or a wage statement violation may be brought either by the affected employee or by the Commissioner of Labor on behalf of the employee. The Commissioner of Labor may also enforce the wage payment, wage notice and wage statement provisions by an administrative action.⁵

Conclusion

As mentioned above, the Act that mandated the changes to the NYLL was dubbed by the legislature as the “Wage Theft Prevention Act.”⁶ The Sponsors Memorandum, submitted by the bill’s sponsor, State Senator Diane J. Savino (D - Staten Island/Brooklyn), in support of the bill, states the law is intended to address (i) a perceived problem of employers failing to pay the correct amount of wages and overtime compensation⁷ and (ii) a perceived problem that many employers fail to adequately inform employees of their wages and how they are computed.⁸ In seeking to address these issues, the law imposes a significant and ongoing documentation requirement and increases the penalties for wage payment and notice failures. In addition, by permitting plaintiffs to recover attorneys’ fees in connection with notice violations, the law creates an incentive for the plaintiffs’ bar to bring individual and collective actions for notice violations.

No doubt, the additional paperwork will be an administrative burden for New York employers especially in the infancy of the new law. Over time, however, the law may prove beneficial to employers faced with defending themselves against costly wage and hour litigation. Indeed, it may have the effect of reducing the instances of frivolous litigation against compliant employers.

Employers should familiarize themselves with the new legal requirements and consult with legal counsel as necessary to assist them in ensuring compliance.