Categories: Retail

by Jennifer A. Goldman and Peter M. Panken

Since the Wage Theft Prevention Act (“WTPA”) became effective April 9, 2011, New York employers have faced harsher penalties for failing to pay employees minimum wages and overtime.  As reported in two previous Act Now Advisory’s, (December 15, 2010, and April 4, 2011) the WTPA, which amended New York’s Labor Law, significantly increased employers’ penalties for unpaid wage and hour violations, among other things.

Prior to the effective date of the WTPA, liquidated damages were capped at 25 percent of the unpaid wages due. Under the WPTA, however, employees can recover liquidated damages equal to 100 percent of the total amount of unpaid wages due, in addition to the full amount of any underpayment, all reasonable attorney’s fees and prejudgment interest.  While the WTPA does not expressly provide that it applies retroactively to violations that occurred prior to its effective date, employers should be aware that their potential exposure to the 100 percent liquidated damages provision could extend back in time further than they thought since a New York State Supreme Court decision holding that the liquidated damages provision under the WTPA applies retroactively—although this view has not been adopted uniformly.

In Ji v. Belle World Beauty, Inc., the plaintiffs worked as nail technicians at a beauty salon. They alleged wage and hour violations, including being paid a fixed amount per day regardless of the amount of time worked, not being permitted to take breaks, and not being compensated for working overtime.  After complaining to management, the plaintiffs were terminated from employment.

Although the plaintiffs in Ji had last worked for the salon in 2007, they argued that the WTPA should be applied retroactively.  Justice James Solomon agreed, finding that: a) the WTPA was a remedial statute; b) the statute did not impair any vested rights of the employer; and c) the WTPA did not create any new rights of recovery for the plaintiffs.  The court permitted the plaintiffs to amend their complaint to seek liquidated damages of 100% of the unpaid wages prior to April 9, 2011.

By contrast, a New York federal court decision issued in May 2011 directly conflicts with Ji.  In Wicaksono v. XYZ 48 Corp., four former servers of a New York City sushi restaurant sued their former employer for wage and hour violations under both the federal Fair Labor Standards Act (“FLSA”) and New York Labor Law.  With respect to the state law claim, the court held that the enhanced liquidated damages provision of the WPTA should not be applied retroactively, but rather, the Labor Law applied as it existed at the time of the alleged violations.  The court reasoned that “retroactive operation is not favored by [New York] courts and statutes will not be given such construction unless the language expressly or by necessary implication requires it.

Because the federal and state courts have split in interpreting the retroactive effect of the WTPA, employers should keep in mind that plaintiffs may choose to file their claims in state court where the liquidated damages may apply retroactively for any violations that have occurred prior to April 9, 2011.  Employers should also remember that the statute of limitations for state law claims is six years as opposed to three years under the FLSA.

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