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Employer Exposure in Unpaid Wage Lawsuits Increases as Court Applies New York Wage Theft Prevention Act's Liquidated Damages Provision Retroactively

By Michael Arnold

The New York Wage Theft Prevention Act went into effect last April.  (You can read our two previous alerts about this Act here and here).  Among other things, that Act amended Section 198(1-a) of the Labor Law to require courts to impose a liquidated damages award of 100% of the total unpaid wages found to be due – up from the previous 25% cap.  And remember, in addition to recovering up to six years of unpaid wages and these now increased liquidated damages, plaintiffs may also recover attorneys’ fees, costs and pre-judgment interest at a rate of 9% (which is probably 8.99% higher than the interest rate in your standard checking account).

Recently, the New York State Supreme Court (yes, for you non-lawyers, that’s New York’s trial level court, not its highest court), concluded that the amendments to Section 198(1-a) should be applied retroactively.  In Ji v. Belle World Beauty, Inc., Index No. 603228/08 (N.Y. Sup. Ct., N.Y. Cty., Aug. 24, 2011) (Solomon, J.), the court reasoned that Section 198(1-a) was a remedial statute, and that a retroactive application of its changes was appropriate because it would neither impair any vested rights of the defendants nor create any new rights for the plaintiffs.  The court reached this result despite the absence of any retroactivity language in the Wage Theft Prevention Act.  Ultimately, the court permitted the plaintiffs to seek a 100% liquidated damages award against wages that the employer failed to pay before the Act took effect. 

The Ji decision is in direct conflict with a decision rendered by a New York federal court a few months earlier, which held that the amendment to Section 198(1-a) was not retroactive and, therefore, the Labor Law’s liquidated damage provision applied as it existed at the time of the employer’s wage violations.  See Wicaksono v. XYZ 48 Corp., 10 Civ. 3635(LAK)(JCF), 2011 WL 2022644, at*6 n.2 (S.D.N.Y. May 2, 2011).  In light of Ji, however, employers facing claims for unpaid wages that pre-date the Wage Theft Prevention Act should consider modifying their exposure analyses to account for a retroactive application of the liquidated damages amendments to the Labor Law. 

This is also a good time to remind employers that the Wage Theft Prevention Act requires them to provide their existing employees with annual pay notices at some point between January 1 and February 1 of 2012 – just three months from now.

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Martha Zackin