Wage theft occurs when an employer fails to pay wages or benefits owed. (1) It harms low-income employees the most. (2) But depriving almost anyone of earned paychecks, commissions, bonuses, or severance pay causes harm. (3) For some, the harm is life-altering, (4) but few can afford the cost of a lawsuit for breach of contract. (5) And those who can will never be made whole because the plaintiff must pay his own attorney's fees. (6)
However, an adequate means of legal redress does exist. New York Labor Law Article 6 (Labor Law sections 190-199-a) embodies "the state's longstanding policy against the forfeiture of earned but undistributed wages." (7) Some key provisions of Article 6 are Labor Law sections 190, 191, 193 and 198. (8)
Section 190(1) defines "wages" as "the earnings of an employee for labor or services rendered, regardless of whether the amount of earnings is determined on a time, piece, commission, or other basis." (9) With limited exceptions, "wages" also includes "benefits or wage supplements." (10) Section 191 regulates the frequency of wage payments to different classes of employees, except executives, administrators, and professionals earning over nine hundred dollars per week. (11) Section 193 bars "any deduction" from wages unless it is both authorized and for the employee's benefit. (12) Section 198 provides that an employee who wins a wage claim will recover the full amount of the underpayment, along with prejudgment interest, attorney's fees, "and, unless the employer proves a good faith basis to believe that its underpayment of wages was in compliance with the law, an additional amount as liquidated damages equal to one hundred percent of the total amount of the wages found to be due." (13) It further provides that "[a]ll employees shall have the right to recover full wages, benefits and wage supplements and liquidated damages accrued during the six years previous to the commencing of such action." (14)
Despite this rights-affirming or rights-creating language, some courts believe that Article 6 does not give all employees the right to recover unpaid wages. (15) How can that be? To quote Oscar Wilde: "The truth is rarely pure and never simple." (16) Here, the truth is obscured by a series of obstacles. The first is Article 6's confusing text and structure. Article 6 is deficiently drafted and needlessly complex--a proverbial "horse designed by a committee," that is to say, a camel. (17) Section 198(3)'s explicit command--"[a]ll employees shall have the right to recover full wages, benefits and wage supplements"--is buried near the end of a statutory maze. (18) It is thus overlooked by many.
The second obstacle is a mistaken belief that Section 198(3) does not in fact mean what it says. That mistaken belief exists because the leading case interpreting section 198, Gottlieb v. Kenneth D. Laub & Co., was decided before section 198(3)'s rights-affirming or rights-creating language was added to the statute. (19) Gottlieb held that the then-existing version of section 198 was non-substantive, for example, it did not provide a freestanding basis to recover unpaid wages. (20) Few people seemed to notice that section 198 was amended four years later as part of 1997's Unpaid Wages Prohibition Act. (21) As a result, some courts mistakenly apply Gottlieb's holding to the current version of section 198, (22) which, unlike the pre-1997 version, has rights-affirming or rights-creating language. (23)
The third obstacle concerns some courts' mistaken belief that employers can keep employees' wages without violating Labor Law section 193's bar against unauthorized deductions from wages. Those courts incorrectly believe that a failure to pay earned wages is not a deduction from wages. (24) The fourth obstacle concerns the mistaken belief that Article 6 does not give all employees the right to recover earned severance pay and benefits. That mistaken belief exists because some courts fail to take section 198(3)'s command at face value, and compound that error by misconstruing a separate statutory exemption from criminal liability (Labor Law section 198-c) as an exemption from civil liability. (25)
As detailed below, the idea that Article 6 does not give all employees the right to recover unpaid wages is irreconcilably inconsistent with Article 6's text and purpose. This article has three parts. Part I explores the significance of the Unpaid Wages Prohibition Act amendment to Labor Law section 198. Part II explores the purported distinction between deducting and failing to pay wages under Labor Law section 193. Part III explores how Article 6 protects an employee's right to earned severance pay.
HIDING IN PLAIN SIGHT: THE AMENDED VERSION OF LABOR LAW SECTION 198
The issue of whether employers can keep employees' wages without violating section 193's bar against unauthorized "deductions" from wages should be academic. That's because a different section of Article 6, section 198, was amended in 1997 as part of the Unpaid Wages Prohibition Act to include the following rights-affirming or rights-creating language: "All employees shall have the right to recover full wages, benefits and wage supplements accrued during the six years previous to the commencing of such action...." (26) This rights-affirming or rights-creating language superseded the Court of Appeals' 1993 decision in Gottlieb v. Kenneth D. Laub & Co. (27)
The Confusion Caused by Gottlieb v. Kenneth D. Laub & Co.
Before it was amended in 1997, Labor Law section 198 lacked any rights-affirming or rights-creating language. (28) It simply prescribed the remedies for violating Article 6's other provisions. (29) Instead, the leading case interpreting section 198 was Gottlieb v. Kenneth D. Laub & Co. Claiming to be an employee, a real estate salesperson sued for common law breach of contract, and added a claim for attorney's fees under Labor Law section 198(1-a). (30) Gottlieb held that an employee who asserted a common-law contract claim, but did not allege a violation of any substantive provision of Article 6, could not collect attorney's fees under Labor Law section 198(1-a). (31)
Gottlieb's holding was understandable because Labor Law section 198's rights-affirming or rights-creating language did not yet exist, and the plaintiff never invoked Labor Law section 193. (32) But Gottlieb caused much confusion by suggesting that Article 6 does not protect the fruits of an employee's labor, i.e., the wages promised in exchange for the subject work, unless the plaintiff is covered by Labor Law section 191, which regulates the frequency of wage payments to certain classes of employees. (33)
That suggestion is incorrect. Unlike Labor Law Article 19 (which governs payment of minimum wages and overtime), (34) or Articles 8 and 9 (which govern prevailing wage obligations), (35) Article 6 does not dictate how much an employee is paid or whether his earnings are computed on a time, piece, commission, or other basis. Instead, with few exceptions, (36) the parties' verbal or written employment agreement determines the earnings (wages) that Article 6 protects. (37) Thus, a contractual right to the wages at issue is not a bar to a Labor Law section 193 claim, but a prerequisite. (38)
The Unpaid Wages Prohibition Act Amendment to Labor Law Section 198
In its first post-Gottlieb amendment to Article 6, the legislature enacted the Unpaid Wages Prohibition Act. (39) Among other things, it amended Labor Law section 198 to make clear that "[a]ll employees shall have the right to recover full wages, benefits and wage supplements accrued during the six years previous to the commencing of such action." (40) The legislature later enacted the Wage Theft Protection Act, which added "liquidated damages" to the list of things that "[a]ll employees shall have the right to recover" in Labor Law section 198(3). (41)
The Court of Appeals also took corrective action. Having veered off course in Gottlieb, it held in Pachter v. Bernard Hodes Group, Inc. that Article 6's provisions cover employees unless "expressly excluded." (42) Despite Pachter and the amendments to Labor Law section 198, Gottlieb's unwarranted influence persists because few courts have noticed that Labor Law section 198 now has rights-affirming or rights-creating language. (43) One court even mistook the current version of section 198 for the pre-Gottlieb version, suggesting that Gottlieb somehow negated the post-Gottlieb legislative command that "[a]ll employees shall have the right to recover full wages." (44)
Is the Current Version of Labor Law Section 198 Non-Substantive? Does it Even Matter?
Gottlieb held that the much different version of Labor Law section 198 in effect in 1993 was non-substantive. (45) But what about the current version? Does it provide a freestanding right to recover unpaid wages? In other words, is it "substantive"?
The Court of Appeals has made clear that labels such as "remedial" and "substantive" are not very important in construing statutory amendments. (46) Thus, "even so-called 'remedial' statutes may in effect impose a liability where none existed before." (47) Labor Law section 198(3) either affirms or imposes a liability because it commands that "[a]ll employees shall have the right to recover full wages, benefits and wage supplements and liquidated damages." (48)
When the legislature amends a statute, it is deemed to have intended a material change in the law. (49) Therefore, the clear and unequivocal command of Labor Law section 198(3) is not purely "remedial," but is "substantive" as well. (50) However, the debate about whether section 198(3) is "purely remedial" or also "substantive" is academic. This is so for three reasons.
First, courts must give effect to a statute's "plain meaning," (51) and section 198(3)'s meaning could hardly be plainer. Second, "different parts of the same act, though contained in different sections, are to be construed...