March 15, 2011

The Wage Theft Prevention Act

By Diane Giordano, Partner, Tax & Business

The Wage Theft Prevention Act Tax & Business

On December 10, 2010, Governor David Patterson signed the Wage Theft Prevention Act (“WTPA”). The WTPA, which will take effect on April 9, 2011, provides additional protections for employees and subjects employers who fail to comply with the WTPA’s requirements to more severe penalties. The WTPA applies to all employees in New York, not just to employees identified as non-exempt.

This new law will require employers to make new disclosures to employees, provide those notices at the inception of employment, and then annually thereafter, and obtain an acknowledgement from every employee, every year. (The notice requirement expands the state’s previous requirement to notify employees of their pay rate, pay days, overtime eligibility, and rate.) There are no exceptions for small employers, although employer size is one of the factors to be taken into consideration if penalties are imposed. Failure to comply with WTPA provisions will result in higher penalties; thus, all New York employers should prepare to improve their notification policies.

The WTPA will require that employers provide employees with a written notice containing certain information including:

  • the employee’s rate or rates of pay, including the overtime rate of pay for non-exempt employees;
  • whether the employee will be paid by the hour, shift, day, week, salary, piece, commission or other;
  • whether the employer will claim any allowances as part of the minimum wage (such as tip, meal or lodging allowances); and
  • the employer’s regular pay day.

Employers must provide employees with this written notice at the time of their hire and on or before February 1st of each subsequent year of the employee’s employment. The notice must be provided to employees in English and in the language identified by each employee as his/her primary language. Employers are required to preserve and maintain this documentation for six years.

If an employer fails to provide an employee with notice within ten business days of his/her first day of employment, the employee may recover $50 for each work week during which the violation occurred up to a maximum of $2,500 together with attorneys’ fees and costs.

The WTPA also imposes new requirements for information that must be included in the statement that is required to be provided with every payment of wages. Wage statements must include:

  • dates worked covered by the payment of wages;
  • employee’s name; employer’s name; employer’s address and phone number; pay rate(s) and pay basis;
  • gross wages; deductions; allowances, if any are claimed as part of minimum wages; and net wages.
  • If the employee is not exempt from receiving overtime compensation, the wage statement must also include regular hourly rate(s); overtime rate(s); number of regular hours worked; and the number of overtime hours worked.
  • If the employee is paid on a piece-rate basis, the statement must include the applicable piece rate(s) and number of pieces completed at each rate.
  • An employee may also request that the employer provide a written explanation of how wages were computed.

If an employer is found to have retaliated against an employee because the employee complained that the employer violated any of these provisions, then the employee may be entitled to reinstatement, back pay and front pay. The employee may also recover up to $10,000 in liquidated damages.

Employers who fail to pay employees minimum wage or overtime compensation shall be guilty of a class B misdemeanor and upon conviction shall be fined an amount between $500 and $20,000 or imprisoned for up to one year. If the employer is convicted of a subsequent offense within six years of the prior offense, then such employer shall be guilty of a felony and upon conviction shall be fined an amount between $500 and $20,000 or imprisoned for up to one year and one day.

The WTPA imposes new requirements upon New York employers and subjects employers who fail to abide by such requirements to severe penalties. It is very important for all NYS employers to review employee notification and payroll practices to ensure compliance with the WTPA.

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