New York Court Rules That Employees Can Sue for Untimely Payment of Earned Salary
In Rosalba Espinal v Sephora USA, Inc. 2024 WL 4241537 (S.D.N.Y.), Judge Paul A. Engelmayer held that employees engaged in manual labor have a private right of action under New York Labor Law (NYLL) §198 (1-a) for the untimely payment of earned salary under NYLL §191. The ruling leaves the door open to what Magistrate Judge Gabriel W. Gorenstein described, in his report recommending dismissal of the action, as the potential for liquidated damages exceeding, in “astronomical proportions,” the actual harm suffered by plaintiffs.
The plaintiffs, who worked as a beauty advisor and operations associate at Sephora, brought a putative class action alleging that Sephora’s biweekly pay schedule violates NYLL §191(1)(a)(1), which requires manual workers be paid weekly (and no later than seven calendar days after the end of the week in which the wages are earned), and that they are entitled to punitive damages (measured at a full week's pay for every week where wages were untimely paid) under NYLL §198 (1-a). According to the amended complaint, the plaintiffs suffered actual damages by Sephora’s pay schedule by being temporarily deprived of their earned money every other week, including the opportunity to use and/or invest it.
Sephora challenged the plaintiffs’ Article III standing to bring the action under Federal Rule of Civil Procedure 12(b)1 and 12(b)6, arguing that there is neither an express or implied right of action for NYLL §191 violations. In denying Sephora’s motion, Judge Engelmayer rejected Magistrate Judge Gorenstein’s recommendation to dismiss the action following the New York Appellate Division, Second Department’s recent ruling in Grant v. Glob. Aircraft Dispatch, Inc., 223 A.D.3d 712 (2d Dept. 2024), holding that NYLL §198(1-a) does not authorize a private right of action for claims of late payment.
Instead, Judge Engelmayer adopted the rationale followed by the New York Appellate Division, First Department in Vega v. CM & Assocs. Constr. Mgmt., LLC, 175 A.D.3d 1144 (1st Dept. 2019), which held that Labor Law §198 (1-a) expressly provides a private right of action for a violation of Labor Law §191 and that the term “underpayment” in NYLL §198(1-a) included untimely wage payments since “[t]he moment that an employer fails to pay wages in compliance with §191(l)(a), the employer pays less than what is required." 175 A.D.3d 1144. In contrast, the Grant Court interpreted the meaning of “underpayment” to mean the employee received less than the amount agreed upon and not just untimely receipt, and that NYLL §198’s legislative history was aimed at remedying an employer’s failure to pay wages. Id. at 719.
Key to Judge Engelmayer’s decision was the parallel relationship between New York Labor Law and the 1938 Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq., and the New York Legislature's intention that its remedial provisions provide at least equal protection to workers as those as of the FLSA. The district court specifically noted the Second Circuit’s holding in Rana v. Islam, 887 F.3d 118, 123 (2d Cir. 2018) that liquidated damages provisions of the NYLL and FLSA are in pari materia and to be construed together.
The fact an award of liquidated damages would result in a seemingly unconscionable result in favor of the Sephora employees did not go unnoticed by the court. Magistrate Judge Gorenstein highlighted in his report that liquidated damages for late payments would exceed “by astronomical proportions the actual harm to the plaintiffs,” and could amount to 57,800% of the plaintiffs’ actual loss, an amount that he concluded was not only not intended by the legislature, but further was indicative of the legislature’s intent in the meaning of the term “underpayment” as money not paid, not just paid late. (Rept. at p.9-10) He further noted that the New York Court of Appeals has held that a court must “interpret a statute so as to avoid an unreasonable or absurd application of the law” citing Lubonty v. U.S. Bank Nat’l Ass’n, 34 N.Y. 3d 250, 255 (2019). Nonetheless, Judge Engelmayer found this point of little value, noting that “The NYLL's liquidated damages provision, like that of the FLSA, inherently overcompensates the plaintiff, and often dramatically, relative to her actual economic loss, whether her wage claim is for underpayment or delayed payment of a weekly wage.”
New York Law on Frequency of Pay and Inherent Public Policy Considerations
As discussed in the case analysis, Section 191 of the NYLL requires that workers are paid under a certain schedule. Within these categories of workers’ schedules and payment schedules, a group of workers are characterized as “manual” workers. The New York State Department of Labor considers “manual” workers as those who spend 25% or more of their time engaged in physical labor. These are not self-defining terms.
Wages required under the FLSA are due on the regular pay day for the pay period covered. The timing of pay days is governed by state law. New York state law typically requires manual workers to be paid weekly. Employers may be authorized pursuant to provisions of the New York state law and as administered by the New York State Department of Labor to pay manual workers less than weekly.
Prior to the New York state court decision in Vega providing a private cause of action in 2019, it was the New York State Department of Labor and only the New York State Department of Labor that could prosecute claims against employers for violating Section 191 for failing to pay on a timely basis. Under that approach, employers were subject to civil penalties of up to $3,000. It was the Appellate Division, First Department’s decision in Vega v. CM & Associates Construction Management, LLC, which changed all that by finding that a private cause of action for employees existed through Section 198 (1-a) of the NYLL. Since that decision, there have been various, conflicting decisions in both the New York state and federal courts on this very issue concerning what might be characterized as “frequency of pay” claims under the NYLL.
This area embodies deep public policy considerations and concern for proper payments. While legislative or judicial clarifications may be coming at some point for New York employers subject to frequency of pay lawsuits, there is no certainty to the law at this point. At best, the law currently on this issue is unsettled. Ultimately, it will be either the New York Court of Appeals or the New York State Legislature that will provide the final governing law on frequency of pay lawsuits. Unquestionably, this area, like so many areas involving wage and hour considerations, reflects dynamic public policy considerations. In light of the lack of clarity in the law, employers are well advised to be ever diligent in providing timely wage payments consistent with strict, prudent interpretations of legal requirements.
The plaintiffs, who worked as a beauty advisor and operations associate at Sephora, brought a putative class action alleging that Sephora’s biweekly pay schedule violates NYLL §191(1)(a)(1), which requires manual workers be paid weekly (and no later than seven calendar days after the end of the week in which the wages are earned), and that they are entitled to punitive damages (measured at a full week's pay for every week where wages were untimely paid) under NYLL §198 (1-a). According to the amended complaint, the plaintiffs suffered actual damages by Sephora’s pay schedule by being temporarily deprived of their earned money every other week, including the opportunity to use and/or invest it.
Sephora challenged the plaintiffs’ Article III standing to bring the action under Federal Rule of Civil Procedure 12(b)1 and 12(b)6, arguing that there is neither an express or implied right of action for NYLL §191 violations. In denying Sephora’s motion, Judge Engelmayer rejected Magistrate Judge Gorenstein’s recommendation to dismiss the action following the New York Appellate Division, Second Department’s recent ruling in Grant v. Glob. Aircraft Dispatch, Inc., 223 A.D.3d 712 (2d Dept. 2024), holding that NYLL §198(1-a) does not authorize a private right of action for claims of late payment.
Instead, Judge Engelmayer adopted the rationale followed by the New York Appellate Division, First Department in Vega v. CM & Assocs. Constr. Mgmt., LLC, 175 A.D.3d 1144 (1st Dept. 2019), which held that Labor Law §198 (1-a) expressly provides a private right of action for a violation of Labor Law §191 and that the term “underpayment” in NYLL §198(1-a) included untimely wage payments since “[t]he moment that an employer fails to pay wages in compliance with §191(l)(a), the employer pays less than what is required." 175 A.D.3d 1144. In contrast, the Grant Court interpreted the meaning of “underpayment” to mean the employee received less than the amount agreed upon and not just untimely receipt, and that NYLL §198’s legislative history was aimed at remedying an employer’s failure to pay wages. Id. at 719.
Key to Judge Engelmayer’s decision was the parallel relationship between New York Labor Law and the 1938 Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq., and the New York Legislature's intention that its remedial provisions provide at least equal protection to workers as those as of the FLSA. The district court specifically noted the Second Circuit’s holding in Rana v. Islam, 887 F.3d 118, 123 (2d Cir. 2018) that liquidated damages provisions of the NYLL and FLSA are in pari materia and to be construed together.
The fact an award of liquidated damages would result in a seemingly unconscionable result in favor of the Sephora employees did not go unnoticed by the court. Magistrate Judge Gorenstein highlighted in his report that liquidated damages for late payments would exceed “by astronomical proportions the actual harm to the plaintiffs,” and could amount to 57,800% of the plaintiffs’ actual loss, an amount that he concluded was not only not intended by the legislature, but further was indicative of the legislature’s intent in the meaning of the term “underpayment” as money not paid, not just paid late. (Rept. at p.9-10) He further noted that the New York Court of Appeals has held that a court must “interpret a statute so as to avoid an unreasonable or absurd application of the law” citing Lubonty v. U.S. Bank Nat’l Ass’n, 34 N.Y. 3d 250, 255 (2019). Nonetheless, Judge Engelmayer found this point of little value, noting that “The NYLL's liquidated damages provision, like that of the FLSA, inherently overcompensates the plaintiff, and often dramatically, relative to her actual economic loss, whether her wage claim is for underpayment or delayed payment of a weekly wage.”
New York Law on Frequency of Pay and Inherent Public Policy Considerations
As discussed in the case analysis, Section 191 of the NYLL requires that workers are paid under a certain schedule. Within these categories of workers’ schedules and payment schedules, a group of workers are characterized as “manual” workers. The New York State Department of Labor considers “manual” workers as those who spend 25% or more of their time engaged in physical labor. These are not self-defining terms.
Wages required under the FLSA are due on the regular pay day for the pay period covered. The timing of pay days is governed by state law. New York state law typically requires manual workers to be paid weekly. Employers may be authorized pursuant to provisions of the New York state law and as administered by the New York State Department of Labor to pay manual workers less than weekly.
Prior to the New York state court decision in Vega providing a private cause of action in 2019, it was the New York State Department of Labor and only the New York State Department of Labor that could prosecute claims against employers for violating Section 191 for failing to pay on a timely basis. Under that approach, employers were subject to civil penalties of up to $3,000. It was the Appellate Division, First Department’s decision in Vega v. CM & Associates Construction Management, LLC, which changed all that by finding that a private cause of action for employees existed through Section 198 (1-a) of the NYLL. Since that decision, there have been various, conflicting decisions in both the New York state and federal courts on this very issue concerning what might be characterized as “frequency of pay” claims under the NYLL.
This area embodies deep public policy considerations and concern for proper payments. While legislative or judicial clarifications may be coming at some point for New York employers subject to frequency of pay lawsuits, there is no certainty to the law at this point. At best, the law currently on this issue is unsettled. Ultimately, it will be either the New York Court of Appeals or the New York State Legislature that will provide the final governing law on frequency of pay lawsuits. Unquestionably, this area, like so many areas involving wage and hour considerations, reflects dynamic public policy considerations. In light of the lack of clarity in the law, employers are well advised to be ever diligent in providing timely wage payments consistent with strict, prudent interpretations of legal requirements.
