The New York State Senate

uncontradicted fashion that it is discretionary.

Section three of the bill amends subdivision 2 of section 195 of the
Labor Law to provide that a failure of the employer to produce written
terms of employment upon request, as required by law, shall give rise to
a presumption that the terms of employment presented by the employee are
the agreed upon terms.

Sections four and five of the bill amend sections 198-b and 198-c of the
Labor Law to clarify that the criminal penalties prescribed in those
sections were never intended to limit the civil remedies for wage theft
available to employees under section 198 of Labor Law.

Section six of the bill sets the effective date.

 
JUSTIFICATION:

New York's protections against wage theft, contained largely in Article
6 of the Labor Law, are some of the strongest in the nation.  Among
other things, the statute prohibits the withholding of wages, benefits,
and wage supplements, bars the untimely payment of wages, mandates writ-
ten notice of the terms and conditions of an employee's pay, and
provides additional administrative remedies to certain workers earning
less than $900 per week through the Department of Labor.

Despite the strong language of Article 6, however, judges in New York
often narrowly interpret its prohibitions against wage theft - which has
necessitated several amendments to the statute, including the passage of
Ch. 397 in 2021 to close a judicially-created loophole by declaring that
there is "no exception to liability under (sections 193 and 198) for the
unauthorized failure to pay wages, benefits and wage supplements.". A
closely related problem is that section 190's broad definition of
"wages" continues to be narrowly interpreted by most courts, which hold
that mandatory bonuses, even if clearly promised ahead of time by the
employer, do not count as wages under Article 6 so long as the bonus can
be tied to any factor other than the individual employee's performance.

The way that our modern economy works, however, bonuses are rarely due
to just one employee's individual performance. A bonus may be tied to
the performance of a group (as in Doolittle v. Nixon Peabody LLP, where
multiple lawyers at Nixon Peabody LLP had billed hours for a client that
the plaintiff had secured for the firm through a personal relationship),
the performance of the company as a whole, or an external factor. A soft
beverage portfolio manager at an investment firm, for example, may earn
a bonus based partially on how they managed their portfolio, but also
how the market fared overall for soft beverage sales that year. This
legislation would say that unless the employer clearly told the portfo-
lio manager from the outset that their bonus was purely discretionary,
it must be paid timely and in full, subject to all of the provisions of
Article 6, despite the fact that the bonus can be tied to a factor other
than the portfolio manager's individual performance.

If the bonus is truly discretionary, the employer must notify the
employee in a clear, prominent, uncontradicted manner that such compen-
sation is only payable, if at all, in the employer's sole and absolute
discretion. Effectively, this is a "truth in compensation" requirement
which will improve the functioning of the labor markets by creating
increased transparency. It will also avoid placing honest and responsi-
ble employers -who either pay what they promise, or label purely discre-
tionary bonuses as purely discretionary-at a competitive disadvantage
relative to employers who make representations designed to entice
employees to work for them without necessarily intending to pay those
employees accordingly.

Section three of the bill provides that the failure of an employer to
provide employees with written terms of employment, as required in

Section 195 of the Labor Law, upon request shall give rise to a rebutta-
ble presumption that the terms presented by the employee are the
agreed-upon terms - a provision that already exists for commissioned
salespeople in § 191(c).

Finally, sections four and five of the bill address further judge-creat-
ed loopholes by clarifying that the criminal penalties for wage theft
created in Sections 198-c and 198-c of Labor Law were never intended to
limit the civil penalties available under Section 198.

This bill represents common sense fixes to a judicial narrowing of our
state's landmark wage theft protection laws. Excluding promised (i.e.,
nondiscretionary) employment compensation from the definition of "wages"
unless it is "expressly linked" to an employee's performance is an
archaic notion that is out-of-step with the realities of a modern econo-
my, where production and service results depend on the combined efforts
of many people rather than a solitary individual.

The courts' current narrow definition of "wages" leads to costly,
protracted, and entirely unnecessary litigation. It also makes it hard
for many unpaid employees to find counsel willing to take their case on
a contingency fee basis.

It is the sponsor's hope that in clarifying that all bonuses and other
forms of supplemental compensation that are not purely discretionary
count as wages, despite the fact that such bonus or compensation may be
due to more than one person's job performance, will better align the
protections of Article 6 with how modern workplaces function in reality.
Additionally, further incentivizing employers to provide written terms
of employment, as they are already required to do under law, will lead
to healthier and better-functioning workplaces across the state while
bolstering the remedies available to victims of wage theft under Labor
Law.

 
PRIOR LEGISLATIVE HISTORY:

None

 
FISCAL IMPLICATIONS:

None

 
EFFECTIVE DATE:
Immediate