Published in New York Law Journal (Nov. 14, 2018).
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. 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.” As support, Monagle cited Kletter v. Fleming. Kletter, in turn, cited Slotnick v. RBL Agency for the proposition that section 193 does not apply where the plaintiff does not allege a “specific deduction.” But Slotnick had nothing to do with section 193. 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]”? Kletter and Monagle gave no reason. Nor did they define what a “specific” deduction means. 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.
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. So, the phrase “deduction from wages” calls to mind a paystub notation denoting a subtraction from wages. 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. The plaintiff in Ryan sued under Labor Law section 193 to recover $175,000 in unpaid wages in the form of a nondiscretionary bonus, plus attorney’s fees. 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.”
Despite Ryan, some courts still believe that employers can keep employees’ earned wages without “deducting” them. 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.
