Appellate Ruling On Pay Frequency Claims Creates Uncertainty For NY Employers

New York, N.Y. (January 25, 2024) - On January 17, 2024, New York's Appellate Division, Second Department, issued its long-awaited decision in Grant v. Global Aircraft Dispatch, Inc., finding that "manual workers" as defined under the New York Labor Law ("NYLL") do not have a private right of action to pursue alleged violations of the NYLL's pay frequency requirement. This decision has created a split between two appellate divisions. As a result, while the situation for employers is uncertain, there is cautious optimism for New York employers who have been facing an onslaught of pay frequency litigation in recent years.

By way of quick history, NYLL §191, entitled "Frequency of Payments", mandates that employees categorized as manual laborers be paid weekly, and not later than seven calendar days after the end of the week in which the wages are earned. The law only applies to non-exempt hourly workers.

A "manual worker" is defined as a "mechanic, workingman or laborer" who spends at least 25% of their "working time" doing physical tasks. Prior guidance issued by the New York Department of Labor ("NYDOL") clarified that "individuals who spend more than 25% of working time engaged in physical labor fit within the meaning of the term manual worker." While the NYDOL did not define the term "physical labor" it has been interpreted broadly to include an array of physical tasks performed by employees including (but not limited to) lifting and carrying items, cleaning a store, sweeping the floor, wiping down workstations, standing for long periods of time, stocking shelves, and arranging inventory.

Although the law has existed for some time, until 2019, the enforcement of the law was left exclusively to the NYDOL. However, in 2019, the New York Appellate Division, First Department, issued a landscape-changing decision in Vega v. CM & Associates Construction Management, LLC, 175 AD3d 1144 (2019), recognizing that employees possess a private right of action to pursue pay frequency claims in court. In Vega, the First Department ruled that the term "underpayment" as used in NYLL §198(1-a) "encompasses the instances where an employer violates the pay frequency requirements of §191(1)(a) but pays all wages due before the commencement of an action." Employers quickly learned that, even if they paid their employees the full amount they were due, plaintiffs could recover liquidated damages in the full amount of the "untimely" wages paid. In other words, a meritorious claim entitled each plaintiff to an amount equivalent to the total of all late wages paid.

Federal courts presiding over NYLL 191 claims quickly fell in line with Vega, recognizing the private right of action Vega created. Since its issuance, there have been countless cases filed by employees in all industries: fashion, beauty, retail, production, sales, and the list goes on. With a six-year lookback period for these claims, employers routinely attempted to settle these claims quickly and for a significant discount on the potential exponential liability.

However, last week's Second Department ruling in Grant changed the script. In Grant, the Second Department expressly declined to follow the First Department's Vega decision, finding that Section 198(1-a) does not apply to pay frequency claims and thus, no private right of action exists for employees to pursue alleged violations of Section 191. Instead, the Grant court explicitly stated that "where an employer uses a regular biweekly pay schedule, that employer's payment of wages is due, under the employment agreement between the employer and an employee, every two weeks. Such an agreed-upon pay schedule between an employer and a manual worker violates the frequency of payments required (see Labor Law 191[2]), but is not equivalent, in our view, with a nonpayment or underpayment of wages subject to collection with an additional assessment of liquidated damages." (emphasis added).

Creating even greater momentum for employers is the juxtaposition of the Grant decision with New York Governor Kathy Hochul's Executive Budget Proposal for the 2025 fiscal year, issued on January 16, 2024, which included language that would – if passed – limit a plaintiff's ability to recover liquidated damages for violations of the pay frequency provisions of the NYLL where employees were paid regularly on at least a semi-monthly basis.

So, what now for employers in New York? Are certain employers entitled to pay their employees less frequently than those based in Manhattan? That remains uncertain.

For now, Vega remains good law, at least in the First Department, which encompasses Manhattan and the Bronx. The Second Department's Grant decision applies to employment in the NYC boroughs of Brooklyn, Queens, and Staten Island, and the counties of Nassau, Suffolk, Westchester, Putnam, Dutchess, and Rockland, and creates a direct conflict between two New York appellate courts on whether a private right of action exists for claims alleging violations of NYLL §191. It is anticipated that the New York Court of Appeals will consider the issue in the coming months on a further appeal in the Grant case. Resolution of the split is important for New York employers to have certainty about whether they will be subjected to further such lawsuits. Absent resolution, venue and forum shopping will continue by the plaintiff's bar, seeking to find putative plaintiffs living within the boundaries of the First Department, or alternatively, continuing to file cases in federal court. However, it is possible that some federal judges will decide to follow Grant and differ from the previous decisions following Vega.

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