Authored by Carlos Lopez

Among the many recent amendments to the New York Labor Law, perhaps the most concerning to employers was the expansion of liquidated damages from 25% to 100%.  Viewed in tandem with the statute’s six-year limitations period, the change has the potential to vastly increase employers’ exposure for alleged violations.

Fortunately, the Second Circuit has given employers a modest reprieve, holding that the liquidated damages amendment is not retroactive.  As such, it will apply only from April 2011 forward.

In Gold v. New York Life Ins. Co. [here], a former insurance agent argued that the amendment’s omission of a provision explicitly instructing that it was to apply prospectively meant that it applies retroactively, and therefore that he is entitled to seek 100% liquidated damages on his claims for unlawful wage deductions dating back to 2001.

The Second Circuit rejected that argument, noting that retroactive application of statutes is disfavored in New York and can only be justified by a clear expression of legislative purpose.  Here, the court said, there was no such clear expression.  The court explained that neither the text nor the legislative history of the liquidated damages provision mentions retroactivity.  And it added that a holding of retroactivity would mean that the 2011 amendment would be applied differently from a 2009 amendment, on which the 2011 amendment was built — an odd result that the court did not believe could be justified.

The Second Circuit also rejected Gold’s alternative argument for retroactive application of the 2011 amendment.  According to Gold, because the Labor Law is a remedial statute, any amendments are presumed to have retroactive effect.  While that was the state of the law at one time, the court explained that the New York Court of Appeals, in a 2009 decision, held that the classification of a statute as “remedial” no longer automatically overcomes the strong presumption against retroactivity.  Instead, a better guide for discerning the intent of the legislature is text and history.

Accordingly, the Second Circuit barred Gold from seeking liquidated damages in excess of 25% of any underpayment.  And another thing:  Gold will have to pursue his Labor Law claims in state court, if at all, because the Second Circuit also affirmed the District Court’s decision to decline jurisdiction over Gold’s state law claims and to dismiss the complaint.