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New York State criminalizes underpaying employees

December 20, 2023 Robert Abruzzese, Courthouse Editor

New York Sen. Jessica Ramos, D-East Elmhurst, stands with protesters urging lawmakers to raise New York's minimum wage during a rally at the state Capitol, Monday, March 13, 2023, in Albany, N.Y. AP Photo/Hans Pennink

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Employees who steal have always risked going to prison for stealing from their jobs, while employers often get away with stealing from their workers with only a slap on the wrist. That double standard is now over in New York after Gov. Kathy Hochul recently signed a bill to criminalize employers from stealing wages.

New York employers are being reminded to update their policies, handbooks, posters and notices. However, a crucial development that requires immediate attention is the recent addition to the New York State Penal Law, which now criminalizes the failure to pay proper wages.

This new legislation extends to all individuals who perform work for wages, not just W-2 employees. It’s not limited to refusal to pay weekly wages but also includes non-payment of overtime, promised wages and other compensations. The law now classifies “compensation for labor or services” as property under larceny laws, implying that any payroll mistake or failure to comply with wage laws can lead to serious legal consequences.

“The statute adds ‘compensation for labor or services’ to the definition of property that can be stolen, to all larceny laws,” said Rachel Demarest Gold, a partner at Abrams Fensterman. “That means that a mistake about the latest minimum wage, an error in your tip credit calculation, and failure to pay the proper spread of hours offset or split shift allowance, now have even higher stakes than before.”

With the new minimum wage set to increase to $16.00 in NYC, Long Island and Westchester as of January 1, 2024, employers must be vigilant in their payroll practices to avoid hefty penalties.

In addition to the wage theft law, other significant legislative changes include a ban on “captive audience” meetings and a prohibition on liquidated damages for violating non-disclosure agreements in harassment or discrimination settlements.

Another notable law awaiting the governor’s signature is a potential ban on all non-compete agreements. While not yet enacted, it’s expected that non-compete clauses will be substantially limited soon, possibly with an exception for highly compensated employees.

Employers are advised to ensure that all HR, supervisory, and management staff are well-informed about these new developments. Keeping training, handbooks, policies, and posters up to date is more crucial than ever, given the heightened legal stakes.