Posted with permission by the Albany Law Review. The correct citation is:
Scott A. Lucas, Labor Law Article 6: A Misunderstood Law that Fully Protects All Employees’ Wages, 80 Alb. L. Rev. 1355 (2016/2017).
INTRODUCTION
Wage theft occurs when an employer fails to pay wages or benefits owed.1 It harms low-income employees the most.2 But depriving almost anyone of earned paychecks, commissions, bonuses, or severance pay causes harm.3 For some, the harm is life-altering,4 but few can afford the cost of a lawsuit for breach of contract.5 And those who can will never be made whole because the plaintiff must pay his own attorney’s fees.6
However, an adequate means of legal redress does exist. New York Labor Law Article 6 (Labor Law sections 190–199-a) embodies “the state’s longstanding policy against the forfeiture of earned but undistributed wages.”7 Some key provisions of Article 6 are Labor Law sections 190, 191, 193 and 198.8
* Scott A. Lucas is the principal of the Law Offices of Scott A. Lucas, a New York firm that practices employment law.
1 See, e.g., Peters v. Early Healthcare Giver, Inc., 97 A.3d 621, 630 & n.13 (Md. 2014) (“[Wage theft is] a short-hand term referring to an apparently widespread failure to pay workers their wages due and owing.”).
2 See Myriam Gilles, Class Warfare: The Disappearance of Low-Income Litigants from the Civil Docket, 65 EMORY L.J. 1531, 1545–46 (2016); Martha C. White, Wage Theft Costing Low-Income Workers Billions, NBC NEWS (Sept. 28, 2014), https://www.nbcnews.com/business/economy/wage-theft-costing-low-income-workers-billions-n212406.
3 See, e.g., Brady Meixell & Ross Eisenbrey, An Epidemic of Wage Theft is Costing Workers Hundreds of Millions of Dollars a Year, ECON. POL’Y INST. (Sept. 11, 2014), https://www.epi.org/publication/epidemic-wage-theft-costing-workers-hundreds/.
4 See, e.g., Meixell & Eisenbrey, supra note 3.
5 See Gilles, supra note 2, at 1546.
6 See id.; Danny Cevallos, What Makes Chipotle ‘Wage Theft’ Lawsuit Possible, CNN (Sept. 1, 2016), https://www.cnn.com/2016/09/01/opinions/chipotle-class-action-lawsuit-wages-opinion-cevallos/.
7 See Dreyfuss v. eTelecare Global Solutions-U.S., Inc., No. 08 Civ. 1115, 2010 U.S. Dist. LEXIS 107725, at *14–15 (S.D.N.Y. Sept. 30, 2010) (citations omitted); see also P & L Group, Inc. v. Garfinkel, 541 N.Y.S.2d 535, 537 (App. Div. 1989) (“Unless authorized by law or by consent, an employer is not permitted the self-help remedy of withholding employees’ compensation. Labor Law [sections] 197 and 198 reflect a strong legislative policy aimed at protecting an employee’s right to wages earned.”).
8 N.Y. LAB. LAW §§ 190, 191, 193, 198 (McKinney 2017).
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Section 190(1) defines “wages” as “the earnings of an employee for labor or services rendered, regardless of whether the amount of earnings is determined on a time, piece, commission, or other basis.”9 With limited exceptions, “wages” also includes “benefits or wage supplements.”10 Section 191 regulates the frequency of wage payments to different classes of employees, except executives, administrators, and professionals earning over nine hundred dollars per week.11 Section 193 bars “any deduction” from wages unless it is both authorized and for the employee’s benefit.12 Section 198 provides that an employee who wins a wage claim will recover the full amount of the underpayment, along with prejudgment interest, attorney’s fees, “and, unless the employer proves a good faith basis to believe that its underpayment of wages was in compliance with the law, an additional amount as liquidated damages equal to one hundred percent of the total amount of the wages found to be due.”13 It further provides that “[a]ll employees shall have the right to recover full wages, benefits and wage supplements and liquidated damages accrued during the six years previous to the commencing of such action.”14
Despite this rights-affirming or rights-creating language, some courts believe that Article 6 does not give all employees the right to recover unpaid wages.15 How can that be? To quote Oscar Wilde: “The truth is rarely pure and never simple.”16 Here, the truth is obscured by a series of obstacles. The first is Article 6’s confusing text and structure. Article 6 is deficiently drafted and needlessly complex—a proverbial “horse designed by a committee,” that is to say, a camel.17 Section 198(3)’s explicit command—“[a]ll employees shall have the right to recover full wages, benefits and wage
9 Id. § 190(1).
10 Id.
11 See id. § 190(7), § 191(1)(a)–(d).
12 Id. § 193(1)(b); see also Pachter v. Bernard Hodes Group, Inc., 891 N.E.2d 279, 283 (N.Y. 2008) (holding that executives are covered by the provision of Article 6 unless specifically excluded).
13 LAB. LAW § 198(1-a).
14 Id. § 198(3).
15 See, e.g., Chu Chung v. New Silver Palace Rest., Inc., 272 F. Supp. 2d 314, 316 (S.D.N.Y. 2003) (“[Some] cases that deal with different provisions of Article VI . . . do so narrowly, without looking at other provisions of Article VI of the New York Labor Law.”); Gottlieb v. Kenneth D. Laub & Co., 626 N.E.2d 29, 30–31, 32 (N.Y. 1993).
16 OSCAR WILDE, THE IMPORTANCE OF BEING EARNEST 15 (1898).
17 See Stephen M. Bainbridge, Why a Board? Group Decisionmaking in Corporate Governance, 55 VAND. L. REV. 1, 29–30 (2002); Scott A. Lucas, Does New York’s Wage Payment Law Have a Gaping Loophole?, 41 NYSBA LAB. & EMP. L.J. 49, 49 (2016).
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supplements”—is buried near the end of a statutory maze.18 It is thus overlooked by many.
The second obstacle is a mistaken belief that Section 198(3) does not in fact mean what it says. That mistaken belief exists because the leading case interpreting section 198, Gottlieb v. Kenneth D. Laub & Co., was decided before section 198(3)’s rights-affirming or rights-creating language was added to the statute.19 Gottlieb held that the then-existing version of section 198 was non-substantive, for example, it did not provide a freestanding basis to recover unpaid wages.20 Few people seemed to notice that section 198 was amended four years later as part of 1997’s Unpaid Wages Prohibition Act.21 As a result, some courts mistakenly apply Gottlieb’s holding to the current version of section 198,22 which, unlike the pre-1997 version, has rights-affirming or rights-creating language.23
The third obstacle concerns some courts’ mistaken belief that employers can keep employees’ wages without violating Labor Law section 193’s bar against unauthorized deductions from wages. Those courts incorrectly believe that a failure to pay earned wages is not a deduction from wages.24 The fourth obstacle concerns the mistaken belief that Article 6 does not give all employees the right to recover earned severance pay and benefits. That mistaken belief exists because some courts fail to take section 198(3)’s command at face value, and compound that error by misconstruing a separate statutory exemption from criminal liability (Labor Law section 198-c) as an exemption from civil liability.25
As detailed below, the idea that Article 6 does not give all employees the right to recover unpaid wages is irreconcilably inconsistent with Article 6’s text and purpose. This article has three parts. Part I explores the significance of the Unpaid Wages
18 LAB. LAW § 198(3).
19 See id.; Gottlieb, 626 N.E.2d at 32.
20 See Gottlieb, 626 N.E.2d at 32 (“[The current version contains no redress for claims] outside the substantive provisions of Article 6.”).
21 Unpaid Wages Prohibition Act of 1997, ch. 605, §§ 2, 4, 1997 N.Y. Laws 3392, 3393 (1997).
22 See, e.g., Malinowski v. Wall St. Source, Inc., No. 09 Civ. 9592, 2012 U.S. Dist. LEXIS 11575, at *7–8 (S.D.N.Y. Jan. 31, 2012); Lucas, supra note 17, at 49, 53 & n.6.
23 See LAB. LAW § 198(3); see also Gottlieb, 626 N.E.2d at 32 (demonstrating how a court in 1993 interpreted the law, noting differences from the current law that is now published).
24 See, e.g., Monagle v. Scholastic, Inc., No. 06 Civ. 14342, 2007 U.S. Dist. LEXIS 19788, at *5 (S.D.N.Y. Mar. 9, 2007) (“Section 193 has nothing to do with failure to pay wages or severance benefits, governing instead the specific subject of making deductions from wages.” (citing Kletter v. Flemming, 820 N.Y.S.2d 348, 350 (App. Div. 2006))).
25 See LAB. LAW § 198-c (McKinney 2017).
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Prohibition Act amendment to Labor Law section 198. Part II explores the purported distinction between deducting and failing to pay wages under Labor Law section 193. Part III explores how Article 6 protects an employee’s right to earned severance pay.
I. HIDING IN PLAIN SIGHT: THE AMENDED VERSION OF LABOR LAW SECTION 198
The issue of whether employers can keep employees’ wages without violating section 193’s bar against unauthorized “deductions” from wages should be academic. That’s because a different section of Article 6, section 198, was amended in 1997 as part of the Unpaid Wages Prohibition Act to include the following rights-affirming or rights-creating language: “All employees shall have the right to recover full wages, benefits and wage supplements accrued during the six years previous to the commencing of such action . . . .26 This rights-affirming or rights-creating language superseded the Court of Appeals’ 1993 decision in Gottlieb v. Kenneth D. Laub & Co.27
A. The Confusion Caused by Gottlieb v. Kenneth D. Laub & Co.
Before it was amended in 1997, Labor Law section 198 lacked any rights-affirming or rights-creating language.28 It simply prescribed the remedies for violating Article 6’s other provisions.29 Instead, the leading case interpreting section 198 was Gottlieb v. Kenneth D. Laub & Co. Claiming to be an employee, a real estate salesperson sued for common law breach of contract, and added a claim for attorney’s fees under Labor Law section 198(1-a).30 Gottlieb held that an employee who asserted a common-law contract claim, but did not allege a violation of any substantive provision of Article 6, could not collect attorney’s fees under Labor Law section 198(1–a).31 Gottlieb’s holding was understandable because Labor Law section 198’s rights-affirming or rights-creating language did not yet exist,
26 See Unpaid Wages Prohibition Act of 1997, ch. 605, § 4, 1997 N.Y. Laws 3392, 3393 (1997); see also Wage Theft Prevention Act of 2010, ch. 564, § 7, N.Y. Laws 1, 7 (2010) (adding the words “and liquidated damages” to Labor Law section 198(3)).
27 See N.Y. LAB. LAW § 198(3) (McKinney 2017); Gottlieb, 626 N.E.2d at 23.
28 See Unpaid Wages Prohibition Act of 1997 § 4; see also LAB. LAW § 198(3); Gottlieb, 626 N.E.2d at 29, 32.
29 See Gottlieb, 626 N.E.2d at 32.
30 Id. at 30–31.
31 See id.; see Pachter v. Bernard Hodes Group, Inc., 891 N.E.2d 279, 283 (N.Y. 2008) (citing Gottlieb, 626 N.E.2d at 33) (discussing the limitation of the holding in Gottlieb).
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and the plaintiff never invoked Labor Law section 193.32 But Gottlieb caused much confusion by suggesting that Article 6 does not protect the fruits of an employee’s labor, i.e., the wages promised in exchange for the subject work, unless the plaintiff is covered by Labor Law section 191, which regulates the frequency of wage payments to certain classes of employees.33
That suggestion is incorrect. Unlike Labor Law Article 19 (which governs payment of minimum wages and overtime),34 or Articles 8 and 9 (which govern prevailing wage obligations),35 Article 6 does not dictate how much an employee is paid or whether his earnings are computed on a time, piece, commission, or other basis. Instead, with few exceptions,36 the parties’ verbal or written employment agreement determines the earnings (wages) that Article 6 protects.37 Thus, a contractual right to the wages at issue is not a bar to a Labor Law section 193 claim, but a prerequisite.38
B. The Unpaid Wages Prohibition Act Amendment to Labor Law Section 198
In its first post-Gottlieb amendment to Article 6, the legislature enacted the Unpaid Wages Prohibition Act.39 Among other things, it amended Labor Law section 198 to make clear that “[a]ll employees shall have the right to recover full wages, benefits and wage supplements accrued during the six years previous to the
32 See LAB. LAW § 198(3); Gottlieb, 626 N.E.2d at 31, 34.
33 See Gottlieb, 626 N.E.2d at 32 (implying that agreed upon wages are not “statutory wages” protected by Article 6). Gottlieb also says that nothing in the statute states that employees “in all other respects are excluded from wage enforcement protection under . . . Article 6.” Id.
34 See generally LAB. LAW § 232 (providing overtime standards); id. § 650 (providing public policy rationales for minimum wage).
35 See generally id. § 220 (declaring that eight hours is a legal work day).
36 See, e.g., id. § 194(1)(a)–(d) (“No employee shall be paid a wage at a rate less than the rate at which an employee of the opposite sex in the same establishment is paid for equal work on a job the performance of which requires equal skill, effort and responsibility, and which is performed under similar working conditions . . . .”).
37 See, e.g., Hammond v. Lifestyle Forms & Display Co., No. 08 CV 3964, 2009 U.S. Dist. LEXIS 133649, at *5–6 (E.D.N.Y. Jan. 9, 2009) (citations omitted); see also Ryan v. Kellogg Partners Institutional Servs., 968 N.E.2d 947, 955, 956 (N.Y. 2012) (citations omitted) (analyzing parties’ alleged oral agreement to determine whether Labor Law section 193 was violated when employer neglected to pay nondiscretionary bonus).
38 See, e.g., Walpert v. Jaffrey, 127 F. Supp. 3d 105, 135 (S.D.N.Y. 2015) (“Plaintiff’s cause of action under New York Labor Law is dependent upon the success of his breach of contract claim.” (quoting Dreyfuss v. eTelecare Global Solutions-U.S., Inc., No. 08 Civ. 1115, 2010 U.S. Dist. LEXIS 107725, at *12 n.8 (S.D.N.Y. Sept. 30, 2010))).
39 Unpaid Wages Prohibition Act of 1997, ch. 605, §§ 2, 4, 1997 N.Y. Laws 3392, 3393 (1997).
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commencing of such action.”40 The legislature later enacted the Wage Theft Protection Act, which added “liquidated damages” to the list of things that “[a]ll employees shall have the right to recover” in Labor Law section 198(3).41
The Court of Appeals also took corrective action. Having veered off course in Gottlieb, it held in Pachter v. Bernard Hodes Group, Inc. that Article 6’s provisions cover employees unless “expressly excluded.”42 Despite Pachter and the amendments to Labor Law section 198, Gottlieb’s unwarranted influence persists because few courts have noticed that Labor Law section 198 now has rights- affirming or rights-creating language.43 One court even mistook the current version of section 198 for the pre-Gottlieb version, suggesting that Gottlieb somehow negated the post-Gottlieb legislative command that “[a]ll employees shall have the right to recover full wages.”44
C. Is the Current Version of Labor Law Section 198 Non- Substantive? Does it Even Matter?
Gottlieb held that the much different version of Labor Law section 198 in effect in 1993 was non-substantive.45 But what about the current version? Does it provide a freestanding right to recover unpaid wages? In other words, is it “substantive”?
The Court of Appeals has made clear that labels such as “remedial” and “substantive” are not very important in construing statutory amendments.46 Thus, “even so-called ‘remedial’ statutes may in effect impose a liability where none existed before.”47 Labor Law section 198(3) either affirms or imposes a liability because it commands that “[a]ll employees shall have the right to recover full
40 Id.
41 Wage Theft Prevention Act of 2010, ch. 564, § 7, N.Y. Laws 1, 7 (2010).
42 Pachter v. Bernard Hodes Group, Inc., 891 N.E.2d 279, 283 (N.Y. 2008).
43 See, e.g., Malinowski v. Wall St. Source, Inc., No. 09 Civ. 9592, 2012 U.S. Dist. LEXIS 11575, at *6–8 (S.D.N.Y. Jan. 31, 2012) (citations omitted).
44 Compare id. at *7–8 (citations omitted) (providing that the section is applicable only in certain situations); with N.Y. LAB. LAW § 198(3) (McKinney 2017) (stating that the section is applicable to all employees). Since Labor Law section 198(3) is part of Article 6 and mandates the full payment of wages, section 198(1-a)’s reference to the “failure to pay the wage required by this article” encompasses section 198(3)’s mandate that “[a]ll employees shall have the right to recover full wages, benefits and wage supplements and liquidated damages.” LAB. LAW § 198(1-a) (emphasis added); id. § 198(3).
45 See Gottlieb v. Kenneth D. Laub & Co., 626 N.E.2d 29, 33–34 (N.Y. 1993).
46 See, e.g., Becker v. Huss Co., 373 N.E.2d 1205, 1209 (N.Y. 1978) (citing Berkovitz v. Arbib & Houlberg, Inc., 130 N.E. 288, 290 (N.Y. 1921)).
47 Anonymous v. Anonymous, 243 N.Y.S.2d 630, 637 (Fam. Ct. 1963) (citing Jacobus v. Colgate, 111 N.E. 837, 840 (N.Y. 1916)).
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wages, benefits and wage supplements and liquidated damages.”48 When the legislature amends a statute, it is deemed to have intended a material change in the law.49 Therefore, the clear and unequivocal command of Labor Law section 198(3) is not purely “remedial,” but is “substantive” as well.50 However, the debate about whether section 198(3) is “purely remedial” or also “substantive” is academic. This is so for three reasons.
First, courts must give effect to a statute’s “plain meaning,”51 and section 198(3)’s meaning could hardly be plainer. Second, “different parts of the same act, though contained in different sections, are to be construed together as if they were all in the same section.”52 Therefore, the bar against unauthorized wage deductions in section 193, which is unquestionably “substantive,” must be construed together with section 198’s command that “[a]ll employees shall have the right to recover full wages.”53 Third, statutes are not to be interpreted in a way that would leave one section without meaning or force.54 All employees must have the right to recover full wages because if they did not, then section 198’s command that “[a]ll employees shall have the right to recover full wages” would have no meaning or force—an unacceptable result.55 If the source of all employees’ right to recover wages is not section 198, then it must be section 193’s bar against unauthorized deductions from wages (because section 193 is the only other Article 6 provision through which all employees can recover unpaid wages).56
In short, the Article 6 right of all employees to recover unpaid wages arises under either section 198(3), or section 193, or (most
48 LAB. LAW § 198(3) (emphasis added).
49 See United States v. Quality Stores, Inc., 134 S. Ct. 1395, 1401 (2014) (“When Congress acts to amend a statute, we presume it intends its amendment to have real and substantial effect.” (quoting Stone v. INS, 514 U.S. 386, 397 (1995))); In re OnBank & Trust Co., 688 N.E.2d 245, 247 (N.Y. 1997) (citation omitted) (“[Courts] decline to read the amendment in such a way as to render some of its terms superfluous.”).
50 See, e.g., Tini v. AllianceBernstein L.P., 968 N.Y.S.2d 488, 489 (App. Div. 2013) (“[A]s unpaid salary and commission constitute ‘[w]ages’ under Labor Law [section] 190(1), plaintiff has stated a claim under Labor Law [section] 198.”).
51 Majewski v. Broadalbin-Perth Cent. Sch. Dist., 696 N.E.2d 978, 980 (N.Y. 1998).
52 Cook v. Carmen S. Pariso, 734 N.Y.S.2d 753, 759 (App. Div. 2001).
53 See N.Y. STAT. § 97 (McKinney 2017); LAB. LAW §§ 193(1), 198(3).
54 See STAT. § 98; see also Albano v. Kirby, 330 N.E.2d 615, 618–19 (N.Y. 1975) (citing In re Chase Nat’l Bank, 28 N.E.2d 868, 871 (N.Y. 1940)); Cook, 734 N.Y.S.2d at 759 (“[D]ifferent parts of the same act, though contained in different sections, are to be construed together as if they were all in the same section.”).
55 See LAB. LAW § 198(3).
56 See, e.g., Maggione v. Bero Constr. Corp., 431 N.Y.S.2d 943, 944, 945 (Sup. Ct. 1980); see also LAB. LAW § 193(1)(b) (providing a framework for proper deductions from wages).
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likely) both.57 But most courts have not noticed or given effect to section 198(3)’s amended rights-creating or rights-affirming language.58 Until that judicial oversight is corrected, employees not covered by Labor Law section 191 (the timely pay provision) must look to Labor Law section 193 to recover earned but unpaid wages and liquidated damages.59 However, an increasing number of courts have closed off that avenue of relief as well.60
In addition to overlooking section 198(3)’s rights-affirming or rights-creating language, those courts have also drawn a distinction between “failing to pay” wages and “deducting” wages, thereby allowing employers who fail to pay earned wages to escape Article 6 liability.61 However, as detailed below, there is no difference between “deducting” and “failing to pay” wages.
II. THE FALSE DISTINCTION BETWEEN “DEDUCTING” AND “FAILING TO PAY” WAGES UNDER LABOR LAW SECTION 193
The idea of a distinction between “deducting” and “failing to pay” wages under section 193 first appeared in 2007 in Monagle v. Scholastic, Inc., forty-one years after Labor Law section 193 was enacted.62 Monagle asserted: “Section 193 has nothing to do with failure to pay wages or severance benefits, governing instead the specific subject of making deductions from wages.”63 As support, Monagle cited Kletter v. Fleming.64 Kletter, in turn, cited Slotnick v. RBL Agency65 for the proposition that section 193 does not apply where the plaintiff does not allege a “specific deduction.”66 But
57 See LAB. LAW §§ 193(1), 198(3); see also Maggione, 431 N.Y.S.2d at 945 (“[Section 193] applies to an ‘employee’ and there are no exceptions in that section referring to the type of employee.”).
58 See, e.g., Malinowski v. Wall St. Source, Inc., No. 09 Civ. 9592, 2012 U.S. Dist. LEXIS 11575, at *7–8 (S.D.N.Y. Jan. 31, 2012) (citations omitted).
59 See, e.g., id. at *8; Pachter v. Bernard Hodes Group, Inc., 891 N.E.2d 279, 283, 285 (N.Y. 2008).
60 See, e.g., Perella Weinberg Partners LLC v. Kramer, 58 N.Y.3d 384, 390 (App. Div. 2017) (“[A] wholesale withholding of payment is not a ‘deduction’ within the meaning of Labor Law [section] 193” (citations omitted)).
61 See, e.g., Monagle v. Scholastic, Inc., No. 06 Civ. 14342, 2007 U.S. Dist. LEXIS 19788, at
*1, *2, *5 (S.D.N.Y. Mar. 9, 2007) (citing Kletter v. Flemming, 820 N.Y.S.2d 348, 350 (App.
Div. 2006)).
62 See LAB. LAW § 193; Monagle, 2007 U.S. Dist. LEXIS 19788, at *5 (citing Kletter, 820 N.Y.S.2d at 350).
63 Monagle, 2007 U.S. Dist. LEXIS 19788, at *5 (citing Kletter, 820 N.Y.S.2d at 350).
64 See, e.g., id.
65Slotnick v. RBL Agency Ltd., 706 N.Y.S.2d 431 (App. Div. 2000).
66Kletter, 820 N.Y.S.2d at 350 (citing Slotnick, 706 N.Y.S.2d at 432).
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Slotnick had nothing to do with section 193.67 Thus, Kletter and Monagle were not grounded in precedent.
Why should section 193’s sweeping bar against “any deduction[s]” be construed to bar only “specific deduction[s]”?68 Kletter and Monagle gave no reason.69 Nor did they define what a “specific” deduction means.70 If a specific sum is owed and not paid, is that not a specific deduction? Must there be a written deduction notation? If so, why? Kletter and Monagle did not raise, much less answer, these basic questions.
After Monagle, a split of authority emerged on whether employers can keep employees’ earned wages without violating section 193’s bar against unauthorized “deductions” from wages.71 The distinction between “deducting” and “failing to pay” wages does have a certain intuitive appeal. When we think of a “deduction,” we think of a smaller sum taken from a larger sum.72 So, the phrase “deduction from wages” calls to mind a paystub notation denoting a subtraction from wages.73 Further, an employer’s total withholding of wages is not among the examples of unauthorized deductions mentioned in Labor Law section 193’s legislative history.
Nonetheless, in Ryan v. Kellogg Partners Institutional Services, the Court of Appeals implicitly (and correctly) rejected the idea that a deduction from wages must involve a smaller sum taken from a larger sum.74 The plaintiff in Ryan sued under Labor Law section 193 to recover $175,000 in unpaid wages in the form of a
67 See Slotnick, 706 N.Y.S.2d 432.
68 See N.Y. LAB. LAW § 193 (McKinney 2017) (emphasis added); Monagle, 2007 U.S. Dist. LEXIS 19788, at *5 (citation omitted).
69 See, e.g., Monagle, 2007 U.S. Dist. LEXIS 19788, at *5; Kletter, 820 N.Y.S.2d at 350.
70 See id.
71 See, e.g., Goldberg v. Jacquet, No. 15-3104, 2016 U.S. App. LEXIS 12017, at *1–2 (2d Cir. Jun. 30, 2016) (citing Kletter, 820 N.Y.S.2d at 350); Kule-Rubin v. Bahari Group Ltd., No. 11 Civ. 2424, 2012 U.S. Dist. LEXIS 29000, at *11–12 (S.D.N.Y. Mar. 5, 2012) (“[Defendant violated section 193 when he] refused to pay plaintiffs for the entire month of November 2010.”); Dreyfuss v. eTelecare Glob. Sols.-U.S., Inc., No. 08 Civ. 1115, 2010 U.S. Dist. LEXIS 107725, at *13 (S.D.N.Y. Sept. 30, 2010); Monagle, 2007 U.S. Dist. LEXIS 19788, at *5 (citation omitted) (drawing a distinction between deducting and failing to pay wages); Miteva v. Third Point Mgmt. Co., 323 F. Supp. 2d 573, 577 (S.D.N.Y. 2004); Ryan v. Kellogg Partners Institutional Servs., 968 N.E.2d 947, 956 (N.Y. 2012) (holding that neglecting to pay a nondiscretionary bonus violated Labor Law section 193); Tortorella v. Postworks N.Y., LLC, No. 112686/10, 2011 N.Y. Misc. LEXIS 3603, at *19 (Sup. Ct. July 13, 2011) (“Section 193 . . . prohibits the withholding of wages and not simply a specific deduction as argued by the plaintiffs.”).
72 See, e.g., Deduction, BLACK’S LAW DICTIONARY (6th ed. 1990).
73 See Lucas, supra note 17, at 51.
74 See Ryan, 968 N.E.2d at 956 (finding an unauthorized deduction from wages where there was a failure to pay an additional, vested bonus).
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nondiscretionary bonus, plus attorney’s fees.75 The plaintiff won at trial, and the Appellate Division affirmed, as did the Court of Appeals, which held: “Since Ryan’s bonus . . . constitutes ‘wages’ within the meaning of Labor Law [section] 190 (1), Kellogg’s neglect to pay him the bonus violated Labor Law [section] 193.”76
Despite Ryan, some courts still believe that employers can keep employees’ earned wages without “deducting” them.77 As explored in greater detail below, this narrow view of Labor Law section 193 is incorrect for eight reasons:
- It contravenes section 193’s purpose;
- It wrongly assumes that a deduction from wages can be seen (like a paystub notation);
- The term “any deduction” is sweeping in scope;
- A total failure to pay wages is a deduction “from” wages;
- A specific mental state need not be proved to establish a section 193 violation;
- Allowing all employees to recover unpaid wages under section 193 does not conflict with section 191’s limitation on who can sue for an employer’s untimely payment of wages;
- Court of Appeals precedent refutes the notion that section 193 only bars much smaller, or “targeted,” forms of wage theft; and
- The deduction/failure to pay dichotomy is irrational.
A. The Deduction/Failure to Pay Dichotomy Contravenes the Purpose of Section 193
Labor Law section 193 was “derived from former sections 10 [through] 13 of the Labor Law . . . , which required employers to ‘full[y] and prompt[ly]’ pay earned wages.”78 “[T]he inequity that the legislature sought to prevent” in enacting Labor Law section 193
75 See id. at 950, 956.
76 Id. at 951–52, 956 (citing Pachter v. Bernard Hodes Group, Inc., 891 N.E.2d 279, 284 (N.Y. 2008)); see also Tuttle v. Geo. McQuesten Co., 642 N.Y.S.2d 356, 358 (App. Div. 1996) (holding summary judgment was appropriately granted on plaintiff’s Labor Law section 193 claim based upon his employer’s withholding of deferred payments that he had earned).
77 See, e.g., Hart v. Rick’s N.Y. Cabaret Int’l, Inc., 967 F. Supp. 2d 901, 952 (S.D.N.Y. 2013) (“[Section 193] naturally presupposes deductions from actual, paid wages. Because plaintiffs were never paid such wages, defendants are not liable under [section] 193(1).”).
78 Marsh v. Prudential Sec., 802 N.E.2d 610, 613 (N.Y. 2003) (alteration in original) (emphasis added) (quoting In re Hudacs v. Frito-Lay, Inc., 683 N.E.2d 322, 324 (N.Y. 1997)).
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was employers benefitting from employees’ earned wages.79
This begs the question: what could be more destructive of section 193’s purpose than to exempt from liability employers who benefit the most from employees’ wages, i.e., those who keep all of an employee’s earned wages? If a deduction from wages is something other than a deprivation of the wages due and owing, then what is it? If an employer chooses to keep all or part of a wage payment that it owes, can it escape section 193 liability simply by not making a deduction notation? If so, why?
Courts adopting this myopic view of Labor Law section 193 fail to ask the critical question: why is it wrong for an employer to make an unauthorized deduction from an employee’s wages? Surely it is not because taking part of an employee’s paycheck is worse than taking all of it. Rather, it is because an employee’s wages represent the fruits of his or her labor, and therefore deserve special protection.80 The idea that section 193 exempts total wage thefts cannot be reconciled with the law’s goal of preventing employers from benefitting from employees’ wages.81
But what if the employer cannot afford to pay? Article 6 has no financial hardship defense.82 One who induces another to perform work by promising payment in return has a duty to avoid making a promise he cannot keep.83 Also, grafting a financial hardship exception to Article 6 liability might force non-bankruptcy courts to pick and choose between creditors, and to decide which expenditures should and should not have been made. That approach would be untenable and inconsistent with Article 6’s text and purpose.
B. The Deduction/Failure to Pay Dichotomy Wrongly Assumes that a Deduction from Wages Can be Seen (Like a Paystub Notation)
Contrary to the view of some courts,84 a paystub notation is not a
79 In re Angello v. Labor Ready, Inc., 859 N.E.2d 480, 484 (N.Y. 2006).
80 See People v. Budd, 22 N.E. 670, 682 (N.Y. 1889) (“[T]he liberty mentioned in the bill of rights . . . includes a right to labor and to receive the fruits of one’s labor.” (Gray, J., dissenting)).
81 See Angello, 859 N.E.2d at 484.
82 See, e.g., Polyfusion Elecs., Inc. v. Promark Elecs., Inc., 970 N.Y.S.2d 651, 652–53 (App. Div. 2013) (imposing double damages against manufacturer under Labor Law section 191-c where, due to financial difficulties, it failed to pay earned commissions within five days of the date the parties’ contract was terminated).
83 See Thornton E. Robison, Enforcing Extorted Contract Modifications, 68 IOWA L. REV. 699, 710 n.52 (1983).
84 See, e.g., Strohl v. Brite Adventure Ctr., Inc., No. 08 CV 259, 2009 U.S. Dist. LEXIS 78145, at *28 (E.D.N.Y. Aug. 28, 2009) (“[D]efendants did not ‘deduct’ any amounts from [the
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“deduction.”85 It is only a manifestation of a deduction86—a proverbial shadow on the wall of the cave. Deducting and failing to pay wages are the same thing. “A ‘deduction’ literally is an act of taking away or subtraction.”87 To understand how wages are “taken away,” one must first answer a more fundamental question: what are wages? Wages are “a specialized type of property”88 that “belong to the wage earner until they are pledged or committed to another.”89 “As a right, claim, or interest against the employer, wages yet to be received are intangible property.”90
So, how does one “take away” something with no physical form? Since unpaid wages are intangible and cannot be physically seized,91 the logical definition of “take” in the unpaid wage context is “to deprive one of the use or possession of; to assume ownership.”92 Thus, since a “deduction” is a taking,93 and a “taking” is a deprivation,94 a deduction (taking) occurs when an employee is “deprived” of his earned wages.95
plaintiff’s] wages, but simply failed to pay her all the wages she had earned.” (citing Ireton- Hewitt v. Champion Home Builders Co., 501 F. Supp. 2d 341, 353 (N.D.N.Y. 2007))). The Strohl case involved a plaintiff who alleged that her employer adjusted her total hours downward as a penalty for punching in before or after her 8:00 a.m. start time. See id.
85 See Weston v. Bd. of Educ., 666 N.Y.S.2d 747, 748 (App. Div. 1997) (recognizing that there was a deduction for retirement from a notation on an employee’s pay stub).
86 See id.
87 In re Angello v. Labor Ready, Inc., 859 N.E.2d 480, 482 (N.Y. 2006); Abate, BLACK’S LAW DICTIONARY (6th ed. 1990) (“To do away with or nullify.”); Deduction, BLACK’S LAW DICTIONARY (6th ed. 1990) (defining deduction as abatement); see also Snyder Constr. Co. v. New York, 426 N.Y.S.2d 102, 103 (App. Div. 1980) (“The critical word ‘deduction’ . . . connotes a permanent retainage, whereas the word ‘withhold’ connotes a temporary suspension.”), rev’d on other grounds, Snyder Constr. Co. v. New York, 420 N.E.2d 978 (N.Y. 1981).
88 Sniadach v. Family Fin. Corp., 395 U.S. 337, 340 (1969).
89 Epps v. Cortese, 326 F. Supp. 127, 133 (E.D. Pa. 1971); see also United States v. Larson, No. 07-CR-304S, 2013 U.S. Dist. LEXIS 146452, at *14–15 (W.D.N.Y. Oct. 9, 2013) (“[A] contract and contractual rights can be assigned, and therefore constitute something of value that can be exercised, transferred, or sold.”).
90 Am. Standard Life & Accident Ins. Co. v. Speros, 494 N.W.2d 599, 605 n.9 (N.D. 1993).
91 See Dourlain v. United States/IRS, No. 5:06-CV-424, 2008 U.S. Dist. LEXIS 90465, at *9 (N.D.N.Y. Aug. 27, 2008).
92 Take, BLACK’S LAW DICTIONARY (6th ed. 1990); see also Spring Valley Water-Works v. Bartlett, 16 F. 615, 640 (C.C. D. Cal. 1883) (“[T]his distinction between taking property and depriving its owner of its use seems metaphysical and illusory.”).
93 See In re Angello v. Labor Ready, Inc., 859 N.E.2d 480, 482 (N.Y. 2006).
94 See Take, supra note 92.
95 See, e.g., Ryan v. Kellogg Partners Institutional Serv., 968 N.E.2d 947, 956 (N.Y. 2012) (citations omitted) (holding that employer’s failure to pay a nondiscretionary bonus violated Labor Law section 193); Tuttle v. Geo. McQuesten Co., 642 N.Y.S.2d 356, 357 (App. Div. 1996) (“[W]ithheld moneys constituted ‘wages’ pursuant to Labor Law [section] 190 and, thus, under Labor Law article 6, defendant was not entitled to withhold these payments as a matter of law.”); see also Snyder Constr. Co. v. New York, 426 N.Y.S.2d 102, 103 (App. Div. 1980) (“The critical word ‘deduction’ . . . connotes a permanent retainage, whereas the word ‘withhold’ connotes a temporary suspension.”), rev’d on other grounds, Snyder Constr. Co. v. New York,
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Not surprisingly, courts interpreting other payment laws generally refuse to distinguish between a deduction and a failure to pay. For example, in Sniadach v. Family Finance Corp. of Bay View, a due process case, the U.S. Supreme Court found an employer’s interim freezing of wages pursuant to a wage garnishment to be a “taking of one’s property [that] is so obvious.”96 Since a taking is a deduction,97 and a temporary wage deprivation of indefinite duration is an obvious taking,98 a permanent wage deprivation is an even more obvious taking (deduction). Applying the same logic, a California appeals court in Grier v. Alameda- Contra Costa Transit Dist.99 held that “to withhold wages for work actually performed . . . constitutes a deduction from wages.”100
Likewise, courts interpreting federal wage and hour laws generally refuse to distinguish between a deduction and a failure to pay.101 Typical in this regard is De Leon-Granados v. Eller & Sons Trees, Inc. In holding an employer liable for willfully violating federal wage and hour laws, the De Leon-Granados court explained: “Department of Labor officials made clear that there was no difference between deducting an expense and failing to reimburse the expense.”102
C. The Term “Any Deduction” is Sweeping in Scope
Even if a failure to pay earned wages were an “indirect” rather than “direct” deduction (a dubious assumption), Labor Law section 193 bars not only “direct,” “specific,” or “payroll” deductions; instead, it bars “any [unauthorized] deduction[s].”103 The word “‘any’ means ‘all’ or ‘every’ and imports no limitation,”104 and “is as inclusive as any other word in the English language.”105
420 N.E.2d 978 (N.Y. 1981).
96 Sniadach v. Family Fin. Corp., 395 U.S. 337, 341–42 (1969).
97 Angello, 859 N.E.2d at 482 (“A ‘deduction’ literally is an act of taking away or subtraction.”).
98 Sniadach, 395 U.S. at 342.
99 Grier v. Alameda-Contra Transit Dist., 127 Cal. Rptr. 525 (Ct. App. 1976).
100 Id. at 532.
101 See, e.g., De Leon-Granados v. Eller & Sons Trees, Inc., 581 F. Supp. 2d 1295, 1315 (N.D. Ga. 2008).
102 Id.; see Gaxiola v. Williams Seafood of Arapahoe, Inc., 776 F. Supp. 2d 117, 132 (E.D.N.C. 2011); see also Arriaga v. Fla. Pac. Farms, LLC, 305 F.3d 1228, 1236 (11th Cir. 2002) (“[T]here is no legal difference between deducting a cost directly from the worker’s wages and shifting a cost, which they could not deduct, for the employee to bear.”).
103 See N.Y. LAB. LAW § 193(1) (McKinney 2017).
104 Zion v. Kurtz, 405 N.E.2d 681, 686 (N.Y. 1980).
105 New Amsterdam Cas. Co. v. Stecker, 143 N.E.2d 357, 359 (N.Y. 1957) (citation omitted); see also Dep’t of Hous. v. Rucker, 535 U.S. 125, 131 (2002) (“[T]he word ‘any’ has an
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Accordingly, the phrase “any deduction” may be interpreted as “clearly sweeping in its scope and embrac[ing] both direct and indirect” deductions.106 Further, Article 6’s drafters were familiar with the more restrictive term “[p]ayroll deductions” because it is found in Personal Property Law Article 3-A,107 which is referenced in Labor Law section 193(4).108 But the drafters chose not to use that more restrictive term when drafting section 193(1)’s bar against “any” unauthorized deduction from wages.109
Giving the term “any deduction” its plain (i.e., sweeping) meaning also maintains the consistency of purpose between sections 193(1) and 193(3)(a). Labor Law section 193(3)(a) was added to section 193 to “prohibit wage deductions by indirect means where direct deduction would violate the statute.”110 An employer that would violate section 193 by “paying full wages but then seeking [re]payment at another time”111 cannot escape liability by refusing to ever pay those wages.112 Finally, because courts must liberally construe Article 6’s substantive provisions,113 any uncertainty about section 193’s scope should be resolved in favor of protecting earned wages.114
D. A Failure to Pay Wages is a Deduction “From” Wages
Notwithstanding the intangible nature of wages, it has been suggested that a failure to pay wages is not a “deduction from . . . wages” because a number cannot be deducted from itself.115 That expansive meaning, that is, ‘one or some indiscriminately of whatever kind.’” (citation omitted)); Jute v. Hamilton Sundstrand Corp., 420 F.3d 166, 174 (2d Cir. 2005) (“[S]o long as ‘Congress did not add any language limiting the breadth of that word,’ the term ‘any’ must be given literal effect.” (citations omitted)).
106 Cf. United States v. Lanni, 466 F.2d 1102, 1108–09 (3d Cir. 1972) (“‘[A]ny payment’ is clearly sweeping in its scope and embraces both direct and indirect payments.”).
107 See, e.g., N.Y. PERS. PROP. LAW §§ 46(2), 48-d (McKinney 2017).
108 LAB. LAW § 193(4).
109 Id. § 193(1).
110 In re Angello v. Labor Ready, Inc., 859 N.E.2d 480, 483 (N.Y. 2006).
111 Id. (citation omitted).
112 Id.
113 See, e.g., Klepner v. Codata Corp., 527 N.Y.S.2d 158, 160 (Sup. Ct. 1988) (construing, inter alia, Labor Law section 193); see also Samiento v. World Yacht, Inc., 883 N.E.2d 990, 993–94 (N.Y. 2008) (construing Labor Law section 196(d)).
114 See Cohen v. Stephen Wise Free Synagogue, No. 95 Civ. 1659, 1996 U.S. Dist. LEXIS 4240, at *13 (S.D.N.Y. Apr. 4, 1996); Martinez v. Alubon, Ltd., 978 N.Y.S.2d 119, 121 (App. Div. 2013) (citation omitted) (broadly construing Labor Law section 193).
115 See, e.g., Hart v. Rick’s N.Y. Cabaret Int’l, Inc., 967 F. Supp. 2d 901, 952 (S.D.N.Y. 2013) (citation omitted) (“[Section 193(1)] prohibits only improper ‘deduction[s] from the wages of an employee.’ But in this case, plaintiffs were not paid wages at all.” (emphasis added)).
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view was incorrect for three reasons. First, a number can be deducted from itself.116 Second, in a statute, the word “from” must have a reasonable construction in reference to the subject matter because it may have different meanings under different circumstances.117 Construing the bar against “any deduction from the wages of an employee” to allow an employer to keep all of an employee’s wages is unreasonable because it conflicts with section 193’s goal of preventing employers from benefitting from employees’ earned wages.118
Third and last, the statute does not limit the term “wages” (in the phrase “any deduction from . . . wages”) to the wages earned in a single pay cycle.119 Whether a number can be deducted from itself is thus irrelevant in all but the rarest of cases (i.e., where an employee never receives a single payment or benefit at any time during her employment).120
E. A Specific Mental State Need Not Be Proved to Establish a Labor Law Section 193 Violation
One could argue that a deduction from wages only occurs when the employer acts with a culpable mental state,121 as shown by a deduction notation on a paystub.122 But a culpable mental state
116 See Citizens for Reform v. Citizens for Open Gov’t, Inc., 931 So. 2d 977, 987 (Fla. Dist. Ct. App. 2006) (“Mahavira, a 9th century Indian mathematician, understood and explained . . . [that] any number minus itself equals zero.”).
117 Riley v. Prudential Soc., Inc., 19 N.Y.S.2d 963, 964 (App. Div. 1940) (“‘[F]rom’ . . . may have an inclusive or an exclusive meaning, depending upon the context and the subject- matter.” (citations omitted)); see also Smith v. Helmer, 7 Barb. 416, 420 (N.Y. Gen. Term 1849) (citing Mohawk Bridge Co. v. Utica & Schenectady R.R. Co., 6 Paige Ch. 554, 561 (N.Y. Ch. 1837)).
118 See N.Y. LAB. LAW § 193(1) (McKinney 2017); In re Angello v. Labor Ready, Inc., 859 N.E.2d 480, 484 (N.Y. 2006).
119 See LAB. LAW § 193(1).
120 See, e.g., Antolino v. Distribution Mgt. Consolidators Worldwide, LLC, No. 101541, 2011 N.Y. Misc. LEXIS 5737, at *3 (Sup. Ct. Nov. 28, 2011) (providing an example of where an employee was claiming that no payments whatsoever had been made).
121 See, e.g., Gold v. Am. Med. Alert Corp., No. 14 Civ. 5485, 2015 U.S. Dist. LEXIS 108122, at *9–10 (S.D.N.Y. Aug. 13, 2015) (“[Labor Law section 193] is plausibly susceptible to a broader interpretation . . .[, which] would include an employer withholding the entire amount of a salary because it contends, as here, that it fired an employee for good cause.”).
122 See, e.g., Strohl v. Brite Adventure Ctr., Inc., No. 08 CV 259, 2009 U.S. Dist. LEXIS 78145, at *28?29 (E.D.N.Y. Aug. 28, 2009) (dismissing an improper deduction claim where the plaintiff alleged the defendant violated Labor Law section 193 by adjusting her total hours downward as a penalty for punching in before or after her 8:00 a.m. start time). In Strohl, the court noted that the “defendants did not ‘deduct’ any amount from [the plaintiff’s] wages, but simply failed to pay her all the wages she had earned.” See id. at *28 (citation omitted).
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need not be shown.123 Indeed, even employers who prove they acted in good faith are subject to Article 6 liability for unpaid wages and attorney’s fees (but not liquidated damages).124 Thus, while an employer’s thinking may be relevant in determining the scope of the parties’ agreement, and whether the employer acted in good faith (a defense to the imposition of liquidated damages), it is relevant to little else.125
That’s because a wage is either owed or it is not. When employers enter employment agreements and set work schedules, pay scales, and commission rates, they make choices about what obligations they will incur.126 They have a statutory duty to give employees enough information to know what they will be paid for their work.127 Thus, an employer will be actually or constructively aware of when an employee’s wages are due, and, by extension, when they are unpaid.128 Moreover, grafting an intent requirement onto Labor Law section 193 would make Labor Law section 193 incongruous with Article 6’s other provisions, which have no intent requirement.129
Finally, even if Labor Law section 193 had an intent requirement, it is naïve to suppose that one who enriches him or herself by keeping the fruits of another person’s labor does so with no intent. “[T]he common law rule [is] that a man is held to intend the foreseeable consequences of his conduct,”130 and it is foreseeable that an employee’s wages will not be paid if the employer fails to carefully define, keep track of, and honor its wage payment obligations.131
123 See LAB. LAW § 191 (providing no provision of required culpability).
124 See id.; see, e.g., Slotnick v. RBL Agency Ltd., 706 N.Y.S.2d 431, 431 (App. Div. 2000).
125 See, e.g., Ryan v. Kellogg Partners Institutional Serv., 968 N.E.2d 947, 952 & n.8 (N.Y. 2012) (regarding the burden of showing good faith to avoid liquidated damages).
126 See, e.g., Cron v. Hargro Fabrics, 655 N.Y.S.2d 531, 533 (App. Div. 1997) (discussing obligations imposed on the employer that were created by the employment contract).
127 See LAB. LAW § 195(1)(a).
128 See id.
129 See, e.g., Mize v. State Div. of Human Rights, 304 N.E.2d 231, 233 (N.Y. 1973) (citations omitted) (construing Labor Law section 194 under the same standards as the federal Equal Pay Act, which, as discussed in Belfi v. Prendergast (191 F.3d 129, 135 (2d Cir. 1999)), provides for strict liability); People v. Vetri, 131 N.E.2d 568, 571 (N.Y. 1955) (citations omitted) (construing the predecessor to Labor Law section 191); Polyfusion Elec., Inc. v. Promark Elec., Inc., 970 N.Y.S.2d 651, 652?53 (App. Div. 2013) (citations omitted) (construing Labor Law section 191-c).
130 Radio Officers’ Union of Commercial Telegraphers Union v. NLRB, 347 U.S. 17, 45 (1954) (citations omitted).
131 See generally Ellis v. United States, 206 U.S. 246, 257 (1907) (“If a man intentionally adopts certain conduct in certain circumstances known to him, and that conduct is forbidden by the law under those circumstances, he intentionally breaks the law in the only sense in
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F. Allowing All Employees to Recover Unpaid Wages Under Section 193 Does not Conflict with Section 191’s Limitation on Who Can Sue for an Employer’s Untimely Payment of Wages
A few courts have suggested that executive, administrative, and professional employees should not be able to recover unpaid wages under section 193 because they are not allowed to do so under section 191.132 That argument is misplaced for five reasons. First, Labor Law sections 193 and 191 serve different purposes. Whereas Labor Law section 193 protects all employees, regardless of position or income, against wage theft,133 Labor Law section 191 gives extra protection to manual, clerical, and other employees often associated with modest incomes by requiring that they be paid at specified intervals.134 That makes some sense, because even a short delay in paying a lower-income employee’s wages can cause severe hardship.135
Second, there is no basis for the assumption that Article 6 cannot simultaneously protect some classes of employees against unpaid wages under section 191 and section 193. Article 6 expressly provides that its remedies “may be enforced simultaneously or consecutively so far as not inconsistent with each other.”136 Third, while the protections of sections 191 and 193 overlap, they are not identical. For example, if section 191 did not exist, employers would have no duty to pay certain classes of employees within prescribed intervals.137 Conversely, if a waiter agreed to have a day’s pay deducted from his weekly pay if he broke a dish, and a day’s pay which the law ever considers intent.”); cf. Spodek v. Liberty Mut. Ins. Co., 547 N.Y.S.2d 100, 103 (App. Div. 1989) (“At bar, the tenants’ complaint alleges conversion, a tort which can occur even though there is no wrongful intent to possess the property of another.” (citations omitted)).
132 See, e.g., Quinones v. PRC Mgmt. Co. LLC, No. 14-CV-9064, 2015 U.S. Dist. LEXIS 88029, at *14, *16 (S.D.N.Y. July 7, 2015) (citation omitted) (“[The claim was] a dressed-up claim to recover unpaid wages that must be brought under [Labor Law section] 191 or as a common law contract claim.”); Gordon v. Kaleida Health, 299 F.R.D. 380, 391 (W.D.N.Y. 2014) (“Section 191 provides the remedy for these hourly employees’ claims that they were not compensated for time worked during meal periods.”).
133 N.Y. LAB. LAW § 193(1) (McKinney 2017).
134 Id. § 191(1)(a), (d).
135 The need to promptly pay low wage workers has been recognized for millennia. See Deuteronomy 24:14–15 (English Standard Version) (“You shall not oppress a hired servant who is poor and needy, whether he is one of your brothers or one of the sojourners who are in your land within your towns. You shall give him his wages on the same day, before the sun sets (for he is poor and counts on it), lest he cry against you to the Lord, and you be guilty of sin.”).
136 LAB. LAW § 198(2).
137 See, e.g., id. § 191(1)(a).
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was withheld as a result, he would have a section 193 claim, but not a section 191 claim.138
Fourth, unlike a Labor Law section 191 claim, a Labor Law section 193 claim arguably does not ripen the moment that earned and due wages are unpaid.139 Fifth and finally, unlike section 193, section 191 does not protect benefits and wage supplements.140
G. Court of Appeals Precedent Refutes the Notion that Section 193 Only Bars Much Smaller, or “Targeted,” Forms of Wage Theft
Some courts believe that Labor Law section 193 does not protect the full payment of wages, but only bars a much smaller form of wage theft, namely, charging employees for damaged goods, spoiled merchandise, and the like.141 But such a limitation is found nowhere in the statute.142 Section 193 bars “any” unauthorized deductions, not merely those that offset losses from damaged goods
138 See, e.g., id. § 193(1)(a)?(b).
139 See Beshty v. GM, 327 F. Supp. 2d 208, 223 (W.D.N.Y. 2004), aff’d, 144 F. App’x. 196 (2d Cir. 2005) (dismissing as moot a section 193 claim where plaintiff’s unpaid wages were paid after receiving a demand letter from plaintiff’s counsel, but before plaintiff’s lawsuit commenced). However, Beshty’s holding appears to be incorrect, since employees whose wages are unpaid are also entitled to liquidated damages under section 198(1-a) and (3). See, e.g., Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697, 700, 716 (1945) (holding that an employer’s untimely, pre-suit payment of overtime did not extinguish plaintiff’s claim for liquidated damages); see also Lanzetta v. Florio’s Enters., Inc., 763 F. Supp. 2d 615, 622 n.10 (S.D.N.Y. 2011) (“A claim for unpaid wages accrues on the date on which the employee should have been paid for services rendered but was not.” (citing Doo Nam Yang v. ACBL Corp., 427 F. Supp. 2d 327, 337 (S.D.N.Y. 2005)); Martin v. United States, 117 Fed. Cl. 611, 620 (Fed. Cl. 2014) (“To hold otherwise would create sufficient uncertainty as to when a violation occurs, and statutory enforcement would prove unworkable.”); Craig Becker, The Check is in the Mail: Timely Payment Under the Fair Labor Standards Act, 40 UCLA L. REV. 1241, 1250 (1993). Perhaps the most sensible approach in the section 193 context would be requiring an “unreasonable delay” before deeming the wages unpaid. See, e.g., Rogers v. City of Troy, 148 F.3d 52, 60 (2d Cir. 1998) (adopting such a requirement in certain limited circumstances before liability attaches).
140 LAB. LAW § 190(1) (“The term ‘wages’ also includes benefits or wage supplements . . . except for the purposes of sections one hundred ninety-one and one hundred ninety-two of this article.”); see also Falk v. FFF Indust., Inc., 731 F. Supp. 134, 143 (S.D.N.Y. 1990) (“[T]he Court finds that wages for the purpose of [sections] 193 and 198 includes salary and other benefits.”). That exclusion of “benefits and wage supplements” from section 191 makes sense. The time for providing a benefit or wage supplement can vary greatly depending on the nature of the promised benefit or wage supplement. Thus, it would be burdensome to force employers to provide promised benefits and wage supplements within section 191’s strict wage payment intervals.
141 See, e.g., Goldberg v. Jacquet, No. 14 Civ. 1581, 2015 U.S. Dist. LEXIS 117860, at *6 (S.D.N.Y. Aug. 31, 2015) (quoting Gold v. Am. Med. Alert Corp., No. 14 Civ. 5485, 2015 U.S. Dist. LEXIS 108122, at *11 (S.D.N.Y. Aug. 13, 2015)); see also Gold, 2015 U.S. Dist. LEXIS 108122, at *11 (“[T]he ‘deductions’ [section 193 prohibits] are better understood as, and limited to, things like fines, payments, or other forms of pay docking.”).
142 See generally LAB. LAW. § 193 (containing no mention of the above listed limitations).
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or spoiled merchandise.143
Courts that believe section 193 only bars deductions for damaged goods, spoiled merchandise, and the like often cite Hudacs v. Frito- Lay, Inc. However, Hudacs does not support that view.144 Hudacs involved a challenge to an employer’s requirement that route salespeople must repay missing cash that had been entrusted to them.145 Hudacs explained that Labor Law section 193 may or may not bar payments from an employee to an employer, depending on the circumstances.146 In fleshing out that issue, Hudacs stated that “section 193 was intended to place the risk of loss for such things as damaged or spoiled merchandise on the employer rather than the employee.”147 Hudacs did not suggest that section 193 only bars deductions for lost or damaged property.148 To the contrary, Hudacs stated that section 193 traces its roots to earlier statutory enactments “designed primarily to ensure full and prompt payment of wages to employees.”149 Later Court of Appeals decisions also confirm that section 193 was designed to ensure full payment of wages.150
The legislative history’s attention to smaller, or “targeted,” wage deprivations reflects an interest in protecting employees’ earned wages from any infringement, even small or indirect ones.151 It does not imply that section 193 allows total wage thefts.152 Yet some courts have concluded just that, and have even come up with language to make total wage thefts sound relatively benign. For example, in Gold v. American Medical Alert Corp., the court stated that section 193 was not violated by “merely the total withholding of wages”153—as if a partial withholding of wages would have somehow
143 Id.
144 In re Hudacs v. Frito-Lay, Inc., 683 N.E.2d 322, 323, 325 (N.Y. 1997).
145 See id.
146 See id. at 325.
147 Id. (citation omitted).
148 See id.
149 Id. at 324 (citation omitted).
150 See Ryan v. Kellogg Partners Institutional Servs., 968 N.E.2d 947, 948, 956 (N.Y. 2012) (citation omitted) (holding that an employer’s neglect to pay a $175,000 nondiscretionary bonus violated Labor Law section 193); In re Angello v. Labor Ready, Inc., 859 N.E.2d 480, 484 (N.Y. 2006) (confirming that the legislature’s intent in enacting Labor Law section 193 was to address employers benefitting from employees’ earned wages); Marsh v. Prudential Sec. Inc., 802 N.E.2d 610, 613 (N.Y. 2003) (citation omitted) (“[Section 193] was derived from former sections 10 [through] 13 of the Labor Law . . . , which required employers to ‘full[y] and prompt[ly]’ pay earned wages.” (emphasis added)).
151 See Gold v. Am. Med. Alert Corp., No. 14 Civ. 5485, 2015 U.S. Dist. LEXIS 108122, at *11 (S.D.N.Y. Aug. 13, 2015).
152 See id.
153 Id. at *5 (emphasis added).
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inflicted greater harm.154
Grafting a “targeted” deduction requirement onto section 193’s bar against “any deduction”155 misses the forest through the trees. Saying that section 193 is not violated by “merely the total withholding of wages”156 is like saying driving 100 miles per hour does not violate a school zone’s 25 miles per hour speed limit if the legislative history only mentions car accidents between 30 and 40 miles per hour. Or that groping female subordinates is not barred by a sex discrimination law if the legislative history only mentions sexist language and leering. In short, there is nothing “mere” about the “total withholding of wages;” rather, it is the most extreme example of the inequity—employers benefitting from employees’ earned wages—that the legislature sought to prevent in enacting section 193.157
H. The Deduction/Failure to Pay Dichotomy is Irrational
If Labor Law section 193 only protected against “things like fines, payments, or other forms of pay docking,”158 then an offending employer could easily avoid section 193 liability by keeping the employee’s entire paycheck, or by tendering a smaller paycheck without using words like “fine” or “pay docking.”159 Such an approach is irrational because it elevates form over substance, ignores the law’s text, and undermines its purpose.
III. ARTICLE 6 PROTECTS EARNED SEVERANCE PAY
Article 6’s confusing text and structure has also generated a split of authority on whether earned severance pay is recoverable under Article 6.160 But the question is not really a close one. As shown below, Article 6 clearly protects all employees’ right to recover earned severance pay.
154 See id. at *5–6.
155 N.Y. LAB. LAW § 193(1) (McKinney 2017).
156 Gold, 2015 U.S. Dist. LEXIS 108122, at *5 (emphasis added).
157 See id.; see also In re Angello v. Labor Ready, Inc., 859 N.E.2d 480, 484 (N.Y. 2006) (“[Section 193 focuses on] the inequity that the legislature sought to prevent.”). The legislature wanted section 193 to prohibit employers from benefitting from employees’ earned wages. See id.
158 Gold, 2015 U.S. Dist. LEXIS 108122, at *11.
159 Id.
160 See Doyle v. Turner, No. 86 CIV. 2792, 1994 U.S. Dist. LEXIS 13623, at *4–5 (S.D.N.Y. Sept. 23, 1994) (noting that severance was recoverable); but see Fraiberg v. 4Kids Entm’t, Inc., 906 N.Y.S.2d 64, 67 (App. Div. 2010) (noting that severance was not covered under Article 6).
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For example, “[s]everance payments are made in consideration for employment—for a ‘service . . . performed’ by ‘an employee for the person employing him.’”161 Severance pay is “earned” at the time an employee is dismissed.162 Labor Law section 198(3) commands that “[a]ll employees shall have the right to recover full wages, benefits and wage supplements and liquidated damages.”163 That should settle the question, since severance pay is a wage, benefit, and/or wage supplement.164
Nonetheless, there is a deep split between the courts that recognize Article 6 civil claims for unpaid benefits and wage supplements for executive, administrative, and professional employees,165 and those that do not.166 The main problem, as explained in Part I above, is that many courts overlook or fail to apply section 198(3)’s rights-affirming or rights-creating language. Thus, it is useful to understand how Article 6’s other provisions protect earned severance pay.
Surprisingly, the main obstacle to a clear understanding of this issue is a criminalizing statute—Labor Law section 198-c. Section
161 United States v. Quality Stores, Inc., 134 S. Ct. 1395, 1400 (2014) (quoting Treas. Reg. § 3121 (2012)).
162 See In re Bethlehem Steel Corp., 479 F.3d 167, 171 (2d Cir. 2007).
163 N.Y. LAB. LAW § 198(3) (McKinney 2017). This article does not address the circumstances under which the Employee Retirement Income Security Act (29 U.S.C. § 1001) (“ERISA”) will preempt an Article 6 claim for unpaid benefits or wage supplements. See, e.g., Karmilowicz v. Hartford Fin. Servs. Grp., No. 11 CIV. 539, 2011 U.S. Dist. LEXIS 77481, at *37 (S.D.N.Y. July 14, 2011) (noting that severance pay cannot be recovered under Article 6 when the severance benefits are governed by ERISA).
164 Labor Law section 190(1) defines “wages” to include “benefits or wage supplements” as they are defined in Labor Law section 198-c, and “separation . . . pay” is included in section 198-c’s definition “benefits or wage supplements.” See LAB. LAW §§ 190(1), 198-c(2).
165 See, e.g., Pachter v. Bernard Hodes Group, Inc., 505 F.3d 129, 132 n.3 (2d Cir. 2007) (“[T]he limitation [in section 198-c(3)] appears to apply only to that particular section . . . .”); Quinones v. PRC Mgmt. Co. LLC, No. 14-CV-9064(VEC), 2015 U.S. Dist. LEXIS 88029, at *15 (S.D.N.Y. July 7, 2015) (citing Pachter, 891 N.E.2d at 284) (“Reductions from [‘benefits or wage supplements’ defined in section 198-c(2)] after compensation is earned or vested are prohibited under [Labor Law section] 193.”); Di Bari v. Morellato & Sector USA, Inc., No. 0109387/2008, 2012 N.Y. Misc. LEXIS 3875, at *4 (Sup. Ct. Aug. 9, 2012) (citation omitted) (“Critically, section 193 does not exclude executives from protection, unlike, e.g., section 198- c.”); Biedermann v. Skyline Restoration, Inc., No. 2071-05, 2008 N.Y. Misc. LEXIS 9595, at *12–13 (Sup. Ct. June 18, 2008) (“‘Wages’ also includes benefits or wage supplements such as reimbursement for expenses, as well as health, welfare, and retirement benefits earned by the employee. Thus, if plaintiff is an ‘employee’ within the meaning of Article 6, plaintiff’s wages would include his auto expense and insurance reimbursement.” (citation omitted)).
166 See, e.g., Malinowski v. Wall St. Source, Inc., No. 09 Civ. 9592, 2012 U.S. Dist. LEXIS 11575, at *8 (S.D.N.Y. Jan. 31, 2012) (citations omitted); Fraiberg v. 4Kids Entm’t, Inc., 906 N.Y.S.2d 64, 67 (App. Div. 2010); Cohen v. ACM Med. Lab., 678 N.Y.S.2d 432, 435 (Sup. Ct. 1998), aff’d, 1999 N.Y. App. Div. LEXIS 9900, at *1 (Oct. 1, 1999); Demay v. Wheatley Hills Golf Club, Inc., No. 001954/11, 2013 N.Y. Misc. LEXIS 5494, at *23–24 (Sup. Ct. Nov. 29, 2013) (dismissing Article 6 vacation pay claim).
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198-c contains three subsections:
- Labor Law section 198-c(1) authorizes criminal fines and/or jail against employers who fail to pay employees’ benefits or wage supplements;
- Labor Law section 198-c(2) defines “benefits and wage supplements;” and
- Labor Law section 198-c(3) states that “[t]his section shall not apply to any person in a bona fide executive, administrative, or professional capacity” who earns over $900 per week.167
Since employers who fail to pay benefits or wage supplements owed to executives, administrators, and professionals are exempt from criminal liability under section 198-c(3), some courts have held that they are also exempt from civil liability under section 198-c.168 That view is technically correct because a claim for unpaid severance arises under sections 193 and 198, not section 198-c.169 However, some courts have erroneously relied on section 198-c’s criminal liability exception to deny recovery of unpaid severance under sections 193 and 198 as well.170 None of those courts have
167 LAB. LAW § 198-c(1), c(2), c(3) (emphasis added).
168 See id. § 198-c(3) (noting that executives, administrators, and professionals are exempt from the criminal penalties outlined in subsection one); see Akwei v. Port Auth. of N.Y., No. 102555/97, 1998 N.Y. Misc. LEXIS 705, at *10–11 (Sup. Ct. Apr. 7, 1998) (citations omitted). Ill-informed plaintiffs often bring Article 6 civil claims for unpaid benefits and wage supplements under Labor Law section 198-c, a criminal statute that does not provide a civil cause of action, rather than under sections 193, 198(1-a), and 198(3). See, e.g., Akwei, 1998 N.Y. Misc. LEXIS 705, at *1, *10–11. That tends to reinforce the erroneous notion that executive, administrative, and professional employees do not have a civil cause of action under Article 6 for unpaid benefits and wage supplements. See, e.g., Castagna v. Luceno, No. 09-CV-9332(CS), 2011 U.S. Dist. LEXIS 45567, at *71 (S.D.N.Y. Apr. 26, 2011) (citations omitted) (holding that Article 6 permits a private right of action for employees to sue for unpaid severance, but erroneously implying that section 198-c is the source of that right); Romanello v. Sanpaolo, No. 109314/09, 2010 N.Y. Misc. LEXIS 2277, at *14 (Sup. Ct. May 17, 2010) (“[Plaintiff] claim[ed] that failure to provide [severance] benefits is a violation of Labor Law [section] 198-c, and [brought] the seventh cause of action to recover thereunder [i.e., under section 198-c, and not under section 193].”), rev’d sub. nom., 949 N.Y.S.2d 345, 352 (App. Div. 2012), modified on other grounds, 998 N.E.2d 1050, 1053 (N.Y. 2013); see also Garg v. Wyckoff Heights Med. Ctr., Inc., No. 7631/13, 2013 N.Y. Misc. LEXIS 6446, at *11 (Sup. Ct. Dec. 30, 2013). Courts need not “find” a cause of action under Labor Law section 198-c because: (a) benefits and wage supplements are “wages” under section 190(1) and, by extension, under all of Article 6’s civil provisions except where expressly excluded; and (b) an employer’s neglect to pay wages is actionable under section 193. See Ryan v. Kellogg Partners Institutional Servs., 968 N.E.2d 947, 956 (N.Y. 2012) (citations omitted); Pachter, 891 N.E.2d at 283–84.
169 See Cohen, 678 N.Y.S.2d at 435.
170 See, e.g., Romanello, 2010 N.Y. Misc. LEXIS 2277, at *14 (“[Plaintiff] claim[ed] that failure to provide [severance] benefits is a violation of Labor Law [section] 198-c, and [brought] the seventh cause of action to recover thereunder [that is, under section 198-c, and not under section 193].”).
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explained how or why it reached that conclusion.171
The belief that a criminalizing statute, Labor Law section 198-c, bars civil claims under Labor Law sections 193 and 198 by executives, administrators, and professionals is incorrect for four reasons, each expanded upon below:
- A statute that incorporates another statute’s definition only incorporates the definition, not the entire statute;
- Using section 198-c(3)’s criminal liability exception to bar civil claims under separate Article 6 provisions creates an irreconcilable conflict, and defeats one of Article 6’s main goals;
- Using section 198-c(3)’s criminal liability exception to bar civil claims under separate Article 6 provisions creates other absurdities; and
- Using section 198-c(3)’s criminal liability exception to bar civil claims under separate Article 6 provisions ignores the Court of Appeals’ teachings in Pachter v. Bernard Hodes Group, Inc.172
A. A Statute that Incorporates another Statute’s Definition Only Incorporates the Definition, not the Entire Statute
Article 6’s definition of “wages” comes from Labor Law section 190(1), which incorporates Labor Law section 198-c’s definition of “benefits or wage supplements.”173 A statute that incorporates another statute’s definition only incorporates the definition, not the entire statute.174 Thus, section 190(1) incorporates section 198- c(2)’s definition of “benefits or wage supplements,” but not section 198-c(3)’s exception to criminal liability.175
171 See, e.g., Cohen, 678 N.Y.S.2d at 435.
172 See Pachter, 891 N.E.2d at 281.
173 N.Y. LAB. LAW §§ 190(1), 198-c(2) (McKinney 2017).
174 See, e.g., Keller v. Comm’r, 568 F.3d 710, 725 (9th Cir. 2009). The same principle applies in contract law. See Fix v. Quantum Indus. Partners LDC, 374 F.3d 549, 553 (7th Cir. 2004) (“As the Supreme Court has noted, ‘a reference by the contracting parties to an extraneous writing for a particular purpose makes it a part of their agreement only for the purpose specified.’” (quoting Guerini Stone Co. v. P.J. Carlin Constr. Co., 240 U.S. 264, 277 (1916))).
175 See LAB. LAW § 190(1); Miteva v. Third Point Mgmt. Co., 323 F. Supp. 2d 573, 579 (S.D.N.Y. 2004).
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B. Using Section 198-c(3)’s Criminal Liability Exception to Bar Civil Claims under Separate Article 6 Provisions Creates an Irreconcilable Conflict and Defeats One of Article 6’s Main Goals
“A statutory exception must be strictly construed so that the major policy underlying the legislation is not defeated.”176 The idea that section 198-c(3)’s criminal liability exception shelters offending employers from civil liability under Labor Law sections 193 and 198 irreconcilably conflicts with Labor Law section 198(3)’s command that “[a]ll employees shall have the right to recover full . . . benefits and wage supplements and liquidated damages.”177
C. Using Section 198-c(3)’s Criminal Liability Exception to Bar Civil Claims Under Separate Article 6 Provisions Creates Absurd Results
If Labor Law section 198-c(3)’s criminal liability exception barred Article 6 civil claims for unpaid benefits and wage supplements by executives, administrators, and professionals,178 then, for example, Labor Law section 194 (i.e., the New York Equal Pay Act) would not bar employers from providing unequal benefits and wage supplements to employees because of their gender—an absurd result.179 The Court of Appeals made a similar point in Pachter v. Bernard Hodes Group, Inc., stating: “[U]nder the interpretation of ‘employee’ proposed by Hodes, Labor Law [section] 194 would not prohibit employers from paying similarly situated executives at different rates of compensation solely on account of their gender— an absurd proposition that the legislature surely did not intend.”180
D. Using Section 198-c(3)’s Criminal Liability Exception to Bar Civil Claims under Separate Article 6 Provisions Ignores the Court of Appeals’ Teachings in Pachter
In Pachter, the Court of Appeals held that executives are employees under Article 6 “except where expressly excluded.”181 Pachter also stated that section 198-c contains the subject
176 In re Radich v. Council of Lackawanna, 462 N.Y.S.2d 928, 931 (App. Div. 1983), aff’d, 460 N.E.2d 223 (N.Y. 1983).
177 LAB. LAW § 198(3).
178 Id. § 198-c(3).
179 Id. § 194.
180 Pachter v. Bernard Hodes Group, Inc., 891 N.E.2d 279, 283 (N.Y. 2008).
181 Id.
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exclusion.182 “The primary definition of ‘contain’ is ‘to keep within limits[;] hold back or hold down . . . .’”183 This is also consistent with the U.S. Court of Appeals for the Second Circuit’s observation that “the limitation [in section 198-c(3)] appears to apply only to that particular section.”184 Nonetheless, some courts have not followed Pachter’s core message—that one section’s exclusions do not apply to other sections unless expressly stated.185
Even if there were room for doubt about the scope of section 198- c(3)’s exception to criminal liability, “all doubts [regarding statutory exceptions] should be resolved in favor of the general provision rather than the exception.”186 Thus, courts should confine section 198-c(3)’s exception to that section, and should not disregard section 198(3)’s command that “[a]ll employees shall have the right to recover full wages, benefits and wage supplements and liquidated damages.”187
CONCLUSION
Though poorly drafted and unnecessarily complex, Article 6 fully protects all employees’ wages, benefits, and wage supplements. All courts should reject the false dichotomy between “deducting” and “failing to pay” wages, and respect the legislature’s command that “[a]ll employees shall have the right to recover full wages, benefits and wage supplements and liquidated damages.”188 Only then will Article 6’s promise be fulfilled.
182 See id. at 282.
183 Multiform Desiccants, Inc. v. Medzam, Ltd., No. 91-CV-0095E, 1995 U.S. Dist. LEXIS 18548, at *25 n.11 (W.D.N.Y. Dec. 7, 1995).
184 Pachter v. Bernard Hodes Group, Inc., 505 F.3d 129, 132 n.3 (2d Cir. 2007); see also Miteva v. Third Point Mgmt. Co., 323 F. Supp. 2d 573, 579 (S.D.N.Y. 2004) (“[Section 198-c] makes exclusions that are specifically for purposes of that section only.”).
185 For example, after citing Pachter, the court in Wiggins v. Hain Pure Protein Corp., cited cases interpreting section 198-c(3) and concluded that “executives . . . may not bring a claim under section 193 for deductions of non-wage benefits.” Wiggins v. Hain Pure Protein Corp., 829 F. Supp. 2d 231, 242 (S.D.N.Y. 2011) (first citing Wagner v. EdisonLearning, Inc., No. 09 Civ. 831, 2009 U.S. Dist. LEXIS 32965, at *10 (S.D.N.Y. April 17, 2009); then citing Fraiberg v. 4Kids Entm’t, Inc., 906 N.Y.S.2d 64, 67 (App. Div. 2010)); see also Quinones v. PRC Mgmt. Co. LLC, No. 14-CV-9064, 2015 U.S. Dist. LEXIS 88029, at *15 (S.D.N.Y. July 7, 2015) (“Reductions from [‘benefits or wage supplements’ defined in section 198-c(2)] after compensation is earned or vested are prohibited under [Labor Law section] 193.” (citing Pachter, 891 N.E.2d at 284)).
186 Van Amerogen v. Donnini, 577 N.E.2d 1035, 1036 (N.Y. 1991) (citations omitted).
187 N.Y. LAB. LAW § 198(3) (McKinney 2017).
188 Id.
