By A. Scott Hecker

Seyfarth Synopsis: On December 6, 2023, the Biden Administration announced the release of its Fall 2023 Unified Agenda of Regulatory and Deregulatory Actions. The U.S. Department of Labor’s Wage and Hour Division continues to pursue – with frequent delays – a number of significant rulemakings, including the Division’s proposed increase to the minimum salary level for white-collar exemptions.

While U.S. DOL Wage and Hour Division rulemakings have progressed since the Spring 2023 Regulatory Agenda, many big-ticket items remain in process with uncertain timelines. 

For example, the (extended) comment period on the Department’s rule, “Employee or Independent Contractor Classification Under the Fair Labor Standards Act,” closed approximately one year ago on December 13, 2022.  But the regulated community has yet to learn how the Department will address insights expressed in more than 55,000 comments to the proposed rule.  The current Regulatory Agenda lists November 2023 as the anticipated date for a final independent contractor rule.  Discerning readers may note November 2023 is now part of history.  In fact, the Biden Administration issued its current Regulatory Agenda in December, which comes after November, so one may wonder why DOL memorialized its latest failure to meet an estimated rulemaking deadline, rather than providing a revised estimate.

The Regulatory Agenda lists April 2024 as the estimated date for release of the final rule on the increase to the minimum salary level for white-collar exemptions.  DOL finally published its Notice of Proposed Rulemaking, “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees,” on September 8, 2023.  Seyfarth submitted one of the 33,000+ comments received in response to this NPRM, and we see the April 2024 estimate to issue a final rule as . . . ambitious.  As you likely know, the rule seeks to increase the overtime threshold from $684 per week ($35,568 per year) to $1,059 per week ($55,068 per year).  A footnote explains the threshold could increase, since the final rule will incorporate new wage data.  Hurdles the EAP rulemaking may face as it moves toward final form include Congressional Review Act issues, the November 2024 presidential election, and almost-certain litigation challenging the final rule’s validity.  For more details on the overtime exemption rule’s substance – and the Firm’s comment – please check out our relevant blog posts here and here.

One impactful rule WHD was able to carry across the finish line recently, “Updating the Davis-Bacon and Related Acts Regulations,” purports to clarify and modernize the DBA’s implementing regulations.  The rule went into effect on October 23, 2023, and we blogged about some of the key changes government contractors must address in response.  The updated regulations will also impact some employers that do not hold government contracts if they choose to comply with the Act’s prevailing wage and apprenticeship requirements to claim enhanced tax credits under the Inflation Reduction Act.  See here and here for thoughts on the IRA and its expected effects.

Employers should anticipate the Division will leverage all of its – limited – resources to achieve the Biden Administration’s wage-hour goals before the end of this presidential term.  It takes time to comply with new regulations, so it is prudent for businesses to consider steps they can take now to ensure compliance in the event pending rules become final and binding.

Please connect with the author or your favorite Seyfarth attorney with any questions about wage-hour issues or other compliance concerns.

Date and Time

Thursday, December 5, 2023
3:00 p.m. to 3:45 p.m. Eastern
2:00 p.m. to 2:45 p.m. Central
1:00 p.m. to 1:45 p.m. Mountain
12:00 p.m. to 12:45 p.m. Pacific

Register Here


About the Program

A lot has happened in the 10 years since our national Wage and Hour Litigation Practice Group wrote ALM’s authoritative Wage & Hour Collective and Class Litigation treatise.  We are excited to launch our informative webinar series to discuss—in bite-sized increments—the past decade’s most important changes to the state and federal employee pay litigation landscape.

During this series, the treatise’s authors, along with those who have contributed to the publication and key practice group members, will cover topics ranging from lawsuit fundamentals to arbitration to settlement strategies. 

Few topics have seen more change in the ten years since the treatise’s release than the law surrounding arbitration of wage-hour claims – both federally and in California. Our panel will discuss current law regarding class and collective action waivers in arbitration agreements, mass arbitration management, and best practices for drafting and implementing mandatory arbitration programs. 

Our Wage & Hour Collective and Class Litigation treatise, published by ALM Law Journal Press, is widely recognized as an authoritative resource on the subject and is commonly used by lawyers, judges, and academicians in researching the many complex and evolving procedural and substantive defense issues that may ultimately determine case outcomes. 

Get your copy here.

Speakers

Patrick J. Bannon, Partner, Seyfarth Shaw LLP
Daniel C. Whang, Partner, Seyfarth Shaw LLP
Kelly J. Koelker, Senior Counsel, Seyfarth Shaw LLP
Michael E. Steinberg, Associate, Seyfarth Shaw LLP

Register Here


If you were unable to attend our previous sessions, you can find recordings and materials available at the links below.

Time Well Spent: 10 Years of Wage & Hour Wisdom and What’s on the Way

Time Well Spent Session 2: Shifting Standards of Conditional Certification

Time Well Spent: Session 3: Certification and Decertification

The comment period on the U.S. DOL Wage and Hour Division’s Notice of Proposed Rulemaking, “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees,” closed on November 7, 2023, with interested stakeholders having uploaded over 33,000 submissions.  Now the Department will need to read and respond in preparing its final rule.

Seyfarth gladly seized the opportunity to share its thoughts on the proposed rule with the Department, submitting a comment informed by its extensive wage-hour practice and its interactions with clients, associations, and other contacts across a broad range of industries.  The Firm’s submission, “intend[ed] to lend a measured and productive voice to this important process,” speaks to a number of concerns encapsulated in the proposed rule, including:

  • Negative ramifications of the proposed EAP and HCE exception salary thresholds, such as exceeding the threshold’s traditional “gatekeeper” function; disproportionally impacting certain areas and industries; causing wage compression; harming part-time employees; and infringing on worker flexibility.
  • Unjustified limitations on the amount and type of compensation that can be credited toward the salary thresholds, as well as the unnecessarily-short window to correct underpayments.
  • Unprecedented automatic increases to the salary thresholds based on improper indexing;
  • Problems with the Department’s methodology and assumptions; and
  • The failure to satisfy DOL’s goals, like reducing employee turnover and increasing work-life balance.

Seyfarth also explains employers will need more time to implement such drastic changes.  The proposed effective date would land 60 days after publication of the final rule, but the analytical and logistical processes required for coming into compliance are complex, particularly if performed mid-year, so may require significantly more time.

DOL declined to extend the comment period, suggesting the exemption rules have already gone through proposed and actual changes over the past several years, so everyone is familiar with the issues.  The Department may use a similar argument regarding implementation, i.e., employers already know how to make these changes and, therefore, should not need significant time to comply.

Further, DOL may already have responses in mind to anticipated lines of comment, which could speed up the timeline to publish a final rule.  Rulemaking schedules are made to be broken, but we can expect the Department and Division to move promptly.  It would not be out of bounds to expect a final rule published in late spring or early summer 2024, with an effective date around the 2024 election.

It remains possible – likely? – that any final rule will face legal challenges.  Though many employers may agree some increase in the salary thresholds is justified, steep increases could lead to litigation.  As the U.S. Supreme Court considers whether to maintain its historical deference to agency regulations, while courts more frequently employ the major questions doctrine, predicting the endgame for an overtime exemption final rule remains challenging.

For more on this or any related topic, please do not hesitate to connect with the author or your favorite member of Seyfarth’s Wage and Hour Practice Group.

Date and Time

Thursday, November 16, 2023
2:00 p.m. to 2:30 p.m. Eastern
1:00 p.m. to 1:30 p.m. Central
12:00 p.m. to 12:30 p.m. Mountain
11:00 a.m. to 11:30 a.m. Pacific

Register Here


About the Program

A lot has happened in the 10 years since our national Wage and Hour Litigation Practice Group wrote ALM’s authoritative Wage & Hour Collective and Class Litigation treatise.  We are excited to launch our informative webinar series to discuss—in bite-sized increments—the past decade’s most important changes to the state and federal employee pay litigation landscape.

During this series, the treatise’s authors, along with those who have contributed to the publication and key practice group members, will cover topics ranging from lawsuit fundamentals to arbitration to settlement strategies. 

Join us on November 16th for our third session, where our panelists will discuss:

  • Class certification and decertification under Rule 23 and state law analogues,
  • Recent developments affecting state law wage and hour class actions, and
  • Important differences in California.

Our Wage & Hour Collective and Class Litigation treatise, published by ALM Law Journal Press, is widely recognized as an authoritative resource on the subject and is commonly used by lawyers, judges, and academicians in researching the many complex and evolving procedural and substantive defense issues that may ultimately determine case outcomes. Get your copy here.

Speakers

Michael Afar, Partner, Seyfarth Shaw LLP
Ryan McCoy, Partner, Seyfarth Shaw LLP
Yao Li, Associate, Seyfarth Shaw LLP
Kelly Koelker, Senior Counsel, Seyfarth Shaw LLP

Register Here


If you were unable to attend our previous sessions, you can find recordings and materials available at the links below.

Time Well Spent: 10 Years of Wage & Hour Wisdom and What’s on the Way

Time Well Spent Session 2: Shifting Standards of Conditional Certification

By: A. Scott Hecker

The long wait for a Senate-confirmed U.S. DOL Wage and Hour Division (“WHD”) Administrator is over!  As of October 25, 2023, Jessica Looman has ascended to the top role in one of the Department’s premier enforcement agencies, winning confirmation 51-46.  Operating as Principal Deputy Administrator since January 20, 2021, Ms. Looman’s WHD was active even before she landed the big chair – and a great Capitol view from the Administrator’s Office – by, e.g., “modernizing” the Division’s Davis-Bacon regulations.  Now Ms. Looman has the political gravitas of Senate confirmation behind her as she continues to spearhead rulemaking efforts on independent contractor classification and overtime exemptions, as well as enforcement initiatives like battling child labor abuses.

Historically, presidential administrations have found it difficult to get their Administrator nominees approved, as stakeholders express significant interest in a role tasked with overseeing thorny issues like minimum wage, overtime, tipped work, and employee classification.  Ms. Looman did not engender the same level of resistance as President Biden’s initial Administrator nominee, Dr. David Weil, who served in the same role during the Obama Administration.  Dr. Weil was unable to secure the votes of Democratic Senators Joe Manchin, Mark Kelly, and Kyrsten Sinema (a Democrat at the time, now rebranded as an Independent), but Ms. Looman received support from all three.  She even collected a “Yea” vote from Republican Senator Dan Sullivan, making her confirmation bipartisan.

At the time of Ms. Looman’s nomination, the International Franchise Association (“IFA”) released a statement “congratulat[ing] Jessica Looman on her nomination to be Administrator of the Wage and Hour Division at the Department of Labor,” and noting “[i]n recent weeks, our members have had productive conversations with Acting Administrator Looman about the essential role that franchising plays in our economy and why it is critical that the Department of Labor serves to enforce existing law rather than create new policy.”  July 27, 2022 IFA Statement on Nomination of Jessica Looman to Labor Department Wage and Hour Division.  Further, IFA indicated it “look[ed] forward to working together” with Ms. Looman.  Id. 

Not everyone is a fan, however, and Ms. Looman will undoubtedly face headwinds in her confirmed role.  For example, responding to Ms. Looman’s nomination, and opining on her union background, House Education and Labor Committee Chair Virginia Foxx commented:

Under an “Administrator Jessica Looman,” we can expect to see more of the same bureaucratic antics that have plagued Biden’s WHD since the beginning.  Under Looman’s tenure, we’ve already seen the WHD undercut the Trump administration’s independent contractor rule, implement more burdensome regulations under the Davis-Bacon Act, and end compliance assistance, including the PAID program.  As a former union official, Jessica Looman will likely keep the WHD’s bar incredibly low while throwing workers, employers, and independent contractors under the bus.

Congresswoman Foxx also recently made clear her displeasure with the Department’s and Division’s insistence that the comment period on the notice of proposed rulemaking, “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees,” remains at 60 days.  Along with this kind of congressional pushback, Ms. Looman must keep navigating the turbulent waters of enforcement staff attrition, which will likely limit WHD’s ability to execute on its various, competing priorities. 

Going forward, though, Administrator Looman will face such challenges wearing the badge of Senate confirmation.

For more on this or any related topic, please do not hesitate to connect with the author or your favorite member of Seyfarth’s Wage and Hour Practice Group.

By Lennon Haas and Noah Finkel

Seyfarth Synopsis:  Employers frequently struggle with questions around the compensability of certain activities, classification of employees, and how to structure their policies to avoid Fair Labor Standards Act violations.  Getting the answers wrong can be costly.  But getting them wrong without making reasonable efforts to comply with the law doubles an employer’s exposure.  According to a recent Eastern District of Pennsylvania decision, consulting an experienced labor and employment attorney and implementing policies responsive to that advice can avoid that double trouble.

Many a manufacturer requires its line level employees to wear protective clothing on the job.  And many a case has been litigated over whether time spent donning and doffing that clothing is compensable. 

East Penn Manufacturing Co. found itself embroiled in one such case brought by the Department of Labor that involved employees who worked with lead while making batteries and related components.  A trial determined that East Penn violated the FLSA and owed $22,253,087.56 in back wages.  The DOL asked the court after trial to impose liquidated damages (which double the amount of a back pay award) on East Penn, arguing that the company had not acted in good faith in its attempts to comply with federal law and had no reasonable grounds to believe it had complied with the FLSA.

The court disagreed.  To avoid liquidated damages in FLSA cases, an employer must show that it acted in good faith and had reasonable grounds to believe it complied with the law.  Good faith, said the court, is a subjective requirement that requires employers to “have an honest intention to ascertain and follow” the FLSA.  Reasonableness, meanwhile, “imposes an objective standard” that asks what a reasonably prudent [person] would” do “under the same circumstances.” 

East Penn proved both that it acted in good faith and reasonably.  Every time a donning and doffing issue arose—something that happened in 2003 and 2016—East Penn “took affirmative action to ascertain its FLSA obligations.”  In 2003, the company directed its outside labor and employment attorney to analyze two DOL donning and doffing settlements and advise East Penn about its own compensation policies.  Upon receipt of the lawyer’s memo and recommendations, East Penn adopted one of their attorney’s “solutions” and promulgated a new compensation policy for donning and doffing time.

In 2016, East Penn learned of an OSHA complaint “about the amount of paid time allotted for showering.”  The company revised its compensation policy yet again and solicited the same lawyer’s input on the new proposed policy’s legal compliance.  The lawyer approved the policy and the company implemented it.

“In other words,” said the court, “East Penn relied in good faith on the advice of a properly experienced labor and employment attorney” who himself tried to ascertain if the company’s donning and doffing policies complied with the FLSA.  Indeed, East Penn “tailored its policies in response to, and consistent with” its lawyer’s advice.

For many of the same reasons, the court also held that East Penn acted in an objectively reasonable manner.  The “legitimate legal uncertainty about the compensable status” of donning and doffing time coupled with the company’s actions in response to that uncertainty led the court to conclude “that East Penn was objectively reasonable as a matter of law.”  The court thus denied the DOL’s request for liquidated damages and East Penn was able to avoid paying an extra $22,253,087.56.

For employers facing uncertainty about their compensation policies, classification decisions, or other wage and hour related issues, this opinion provides a roadmap for how to avoid the imposition of liquidated damages in the event liability is found.  Step one is diligently endeavoring to learn what the FLSA requires of an employer.  Step two is structuring policies and conduct accordingly.  And the most efficient, easy-to-prove way of doing both of those is, according to East Penn, by consulting experienced wage and hour counsel.

Those with questions or concerns about compliance with the FLSA or similar state laws should feel free to reach out to a member of Seyfarth Shaw LLP’s world class wage and hour team for additional guidance.

Tips from Seyfarth is a blog series for employers, and their in-house lawyers and HR, payroll, and compensation professionals, in the food, beverage, and hospitality sector. We curate wage and hour compliance “tips” to keep this busy industry informed.


By: Ariel Cudkowicz and Michael Steinberg

Seyfarth Synopsis: Proposed New Rules Under Colorado’s Overtime & Minimum Pay Standards Order Would Narrow Employers’ Use of the Tip Credit and Tip Pools. Meanwhile, Chicago eliminates its tip credit, while state and local efforts to eliminate the tip credit proliferate across the U.S.

Here at TIPS, we’re keeping track of the flurry of legislation making its way through state houses and municipal governments all across the country, in which states and localities seek to eliminate the tip credit.  We previously wrote about such an effort—which failed this year—to eliminate the tip credit in Connecticut.  Restaurant and hospitality employers have come to rely on the tip credit for many decades as a way to manage their labor costs while acknowledging the reality that tips usually boost tipped workers’ earnings well above the minimum wage.

But equally as important as the question of whether an employer can take a tip credit is the related question: Who counts as a tipped worker in the first place? If an employer takes a tip credit for a worker (or group of workers) who don’t qualify, then they risk violating federal and state minimum wage and overtime laws.  We previously wrote about ongoing litigation over the federal government’s “80/20” rule, which focuses on the amount of time a tipped worker can spend on non-tip-producing work to still qualify.

The states, though, may have different and more stringent rules relating to tipped workers.  Recently, on September 29, 2023, the Colorado Division of Labor Standards and Statistics issued proposed amendments to the state’s Overtime & Minimum Pay Standards Order (“COMPS Order #39”).  A public hearing on the proposed changes is scheduled for October 30.  Among other changes, the Division proposes changes to: (1) the definition of “tipped employee” under Colorado law, and (2) which employees may participate in a valid tip pool.  If enacted, restaurant and hospitality employers in Colorado will need to carefully review and update their pay practices with respect to the use of the tip credit and tip pooling.

Currently, Colorado law, consistent with federal law, considers a tipped employee to be “any employee engaged in an occupation in which s/he customarily and regularly receives more than $30 per month in tips.”  The Division says that the $30/month threshold, which has been in place since 1977, is outdated.  The proposed changes would instead define a tipped employee as “any employee who regularly receives more than $1.55 per hour in tips” over a workweek.  In accompanying commentary to the proposed rule, the Division notes that this hourly rate was derived from the estimated inflation-adjusted monthly equivalent of $30 in 2024 dollars—$187.32.  Note also that the change means it will no longer be sufficient for an employer to show that an employee works in an occupation in which workers customarily and regularly receive tips—the new definition makes the inquiry individualized to the particular employee. 

Moreover, under the proposed new Colorado rules, fewer employees will be able to participate in a valid tip pool.  Only those employees who “perform significant customer-service functions in contact with patrons” will be eligible.  This seems to be a significant departure from current law and federal law, which generally permit employees who may have less frequent customer contact than servers or service bartenders—such as bussers, food runners, and barbacks—to participate in a valid tip pool.

Here at TIPS, we’ll keep you posted on the rulemaking process for the proposed new wage order, which could have significant implications.

Meanwhile, the push to eliminate the tip credit continues to spread in states and localities all over the U.S.  Last week, for example, the Chicago City Council voted to approve a “One Fair Wage” bill phasing out the tip credit for tipped workers.  We’re also tracking active bills to eliminate the tip credit in Ohio, Maryland, Massachusetts, New York, Illinois, and Wisconsin, among others.

In short, restaurant and hospitality employers have never faced a more diverse and ever-changing patchwork of laws and regulations in this space.  Luckily, the team at Seyfarth has a repository of frequently updated, nifty survey charts — available for free to our clients — that map out the various federal and state requirements. As always, if you want more in-depth analysis of the rules of the road for taking the tip credit, tip pooling, or the broader panoply of wage and hour obligations affecting the fast-paced restaurant and lodging sectors, do not hesitate to reach out to the authors, or your favorite member of Seyfarth’s Wage and Hour Practice Group.

By: Beth Pelliconi and Noah Finkel

Seyfarth Synopsis:  The Tenth Circuit Court of Appeals has provided a helpful guide to employers seeking to defeat class and collective certification of claims that employees worked off-the-clock and skipped meal and rest periods in order to meet productivity standards.

“We can’t get our work done in the time you’ve allotted” is a common refrain offered by wage-hour plaintiffs and their counsel in off-the-clock cases.  They invoke this to argue that productivity standards or timeliness requirements, particularly against the backdrop of policies or practices limiting overtime, constitute a common issue that should allow them to pursue wage-hour claims on a class or collective basis because those standards or requirements caused them to work overtime off-the-clock or through meal and rest breaks.

But last week in Brayman v. Keypoint Government Solutions, Inc.,  the Tenth Circuit provided a helpful roadmap as to why such allegations may be insufficient to certify a class or collective action.

There, the Tenth Circuit vacated a Colorado district court’s decision to grant certification to a class of employees for claims alleging off-the-clock work and meal and rest period violations under California law.  In doing so, the court reaffirmed the principle that class certification should not be granted in the absence of a vigorous predominance analysis under Rule 23(b)(3), showing that factual issues can be determined by reference to a predominance of common, rather than individualized, forms of proof.    

The employees in Brayman were Field Investigators whose job duties involved conducting interviews, searching public records, and writing reports.  Their claims focused on allegations that they were forced to work off-the-clock and to miss meal and rest breaks in order to meet the employer’s stringent productivity, timeliness and quality standards.

The productivity standard at issue required that employees achieve minimum levels of “source unit” credits per hour worked – they received specified amounts of these credits, per hour, for performing certain essential tasks, whereas other tasks, such as certain administrative tasks, did not qualify for any credit. 

In addition to productivity standards, the employees were required to meet timeliness and quality standards, by completing at least 85% of their assignments by a stated deadline and by submitting reports that did not require revision. 

The employees were subject to discipline for failing to meet these productivity, timeliness, and quality standards.  While they were permitted to work overtime, the employees had to obtain approval from supervisors in advance of doing so, and alleged that overtime hours were limited and not always approved.

Against this factual backdrop, the district court had granted class certification to the employees on their off-the-clock claim, finding that it could be established by common evidence of work assignments, performance expectations, and work hours reflected in the employer’s software systems.  The district court also found that there was common evidence of whether the employer “knew or should have known” about the uncompensated overtime, because employees had complained to supervisors and Human Resources personnel about the productivity standards.

The Tenth Circuit, however, vacated the district court’s order, concluding that its failure to conduct a proper predominance analysis was an abuse of discretion.  In remanding the case, the Tenth Circuit directed the district court to consider the following questions in determining whether individual or common issues predominated in the case: (1) whether each employee in the proposed class worked uncompensated overtime; (2) how much uncompensated overtime was worked by each employee; and (3) whether the employer “knew or should have known” about the uncompensated overtime.  As to the “knew or should have known” standard, the Tenth Circuit signaled that variations in the evidence could make it difficult to conclude that the same common evidence would be admissible in each employee’s individual case.  As the Tenth Circuit noted, some employees stated that the employer’s knowledge of uncompensated overtime arose from the fact that supervisors altered timecards to remove overtime hours, whereas others alleged that they were “encouraged and pressured” by supervisors to work unrecorded overtime hours, and others contended that they were instructed to underreport their overtime hours.    

As for the meal and rest break claims, the district court had granted class certification based on the same evidence underlying the off-the-clock claim, without conducting a separate analysis that reviewed the evidence in connection with the elements of those claims.  The Tenth Circuit found that this was also an abuse of discretion, noting:  “It is one thing to say that because of the workload, the employee was pressured to put in uncompensated overtime.  It is an entirely different thing to say the employee would feel pressured to eliminate rest breaks and meal breaks to get the work done – particularly when employees have autonomy on when they schedule their meal and rest breaks.” 

In addition to vacating the district court’s class certification rulings, the Tenth Circuit reversed the district court’s denial of the employer’s motion to compel certain plaintiffs to arbitrate their California state-law claims.

Brayman is a good reminder of how a proper predominance analysis is to be conducted in connection with class certification motions.  The decision also provides a helpful roadmap for defeating class certification, and also collective action certification, through emphasis of variations in proof and consideration of individualized inquiries that would be required in order to reach liability determinations for wage-hour claims.

By: Paxton Moore and Rob Whitman

Seyfarth Synopsis: New York Governor Kathy Hochul has signed legislation that, effective immediately, adds wage theft to the definition of “larceny” under the state’s penal code, creating potentially harsh penalties for the state’s employers.

Under a recently enacted New York statute, wage theft is considered a form of “larceny” under the state’s penal law. The statute adds to existing criminal penalties for wage theft and allows prosecutors to seek even stronger penalties against violators.

Expanding the Definition of Larceny

Governor Hochul signed the Wage Theft Accountability Act (S2832-A/A154-A) on September 6, 2023. Effectively immediately, the Act amends the Penal Law to include “wage theft” in the definition of “larceny.”

Under the Penal Law, “[a] person steals property and commits larceny when, with intent to deprive another of property or to appropriate the same to himself or to a third person, he wrongfully takes, obtains or withholds such property from an owner thereof.” Penal Law § 155.05(1). The recent amendment revises the definition of “property” to include “compensation for labor or services.” Id. § 155.00(1). It further adds a definition for “workforce,” which “means a group of one or more persons who work in exchange for wages.” Id. § 155.00(10).

Most significantly, the Act adds a subsection that defines larceny by wage theft to mean the following:

A person obtains property by wage theft when he or she hires a person to perform services and the person performs such services and the person does not pay wages, at the minimum wage rate and overtime, or promised wage, if greater than the minimum wage rate and overtime, to said person for work performed. In a prosecution for wage theft, for the purposes of venue, it is permissible to aggregate all nonpayments or underpayments to one person from one person, into one larceny count, even if the nonpayments or underpayments occurred in multiple counties. It is also permissible to aggregate nonpayments or underpayments from a workforce into one larceny count even if such nonpayments or underpayments occurred in multiple counties.

Id. § 155.05(2)(f).

Although the bill’s sponsors fixated on the vulnerability of low-income earners—including non-union construction workers and undocumented immigrants—the new law potentially impacts all employers in the state. It does not include any carve-out provisions or exemptions for particular positions or industries.

An open question is whether the law applies to compensation paid to independent contractors in addition to employees. The Act is not part of the Labor Law, which generally governs the employer-employee relationship, and refers generically to “hir[ing] a person to perform services,” rather than hiring “employees.” But it refers to “wages” and “wage theft”—concepts that derive from the Labor Law and assume an employer-employee relationship—and not to “fees” or the like, which suggests that it is limited to employment and not independent contractor arrangements.

The new law allows for the aggregation of nonpayments or underpayments to one victim employee and for the aggregation of victims, which has two distinct effects. Prosecutors may now (1) seek stronger penalties against employers who steal wages from workers, and (2) try incidents of wage theft committed by the same employer in multiple counties in a single venue. The ability to aggregate claims could result in harsh penalties for both corporate and individual employers. Under the Penal Code, petit larceny includes theft of up to $1,000 and is a Class A misdemeanor. See NY Penal Law § 155.25. A corporation can be fined up to $5,000 for conviction of a Class A misdemeanor. Id. § 80.10(1)(b). Theft of $1,000 or more constitutes grand larceny of varying degrees—the lowest of which, Grand Larceny in the Fourth Degree, constitutes a Class E felony. Id. §§ 155.30-155.42. An individual could face a maximum prison sentence ranging from four to twenty-five years depending on the amount stolen. Id. § 70.00(2)(b-e). For corporations, conviction of a felony carries a fine of up to $10,000. Id. § 80.10(1)(a).

The Labor Law already provides for criminal penalties for wage theft. See Labor Law § 198-a (listing certain offenses as misdemeanors or felonies). The addition of wage theft to the definition of larceny does not appear to alter, replace, or repeal these existing criminal penalties.

The Act, which passed with near unanimous majorities in both chambers of the Legislature, is the latest in an ongoing effort to combat wage theft in New York. According to the bill’s sponsors, beginning in December 2017, the Wage Theft Initiative—a collaboration among seven District Attorney’s Offices, including the five in New York City as well as Westchester and Nassau Counties; the Department of Investigation; the New York City Comptroller’s Office; the New York State Department of Labor; and the New York State Attorney General’s Office—has led the prosecution of ten criminal cases accounting for more than $2.5 million in stolen wages affecting over 400 construction workers. On February 16, 2023, the Manhattan District Attorney announced the creation of the Worker Protection unit to investigate and prosecute wage theft, among other offenses.

According to a co-sponsor, Assemblymember Catalina Cruz, wage theft accounts for almost $3.2 billion in lost wages each year—affecting over 2 million New Yorkers. Cornell University’s Worker Institute sets forth a more conservative estimate, asserting wage theft in New York to account for nearly $1 billion in lost wages affecting tens of thousands of workers.

Outlook for Employers

New York is taking an expansive approach to protect employees and their wages. Failure to properly navigate the State’s complex wage and hour laws now carries potentially harsher outcomes than the already existing criminal and civil penalties. While criminal prosecutions for these offenses will likely be rare and limited to the most egregious violators, all employers are well advised to pay close and careful attention to compliance with their wage payment obligations, and to consult with wage-and-hour counsel if they have any concerns about the administration of their payroll.

By: Rachel V. See, Christopher J. DeGroff, and Andrew L. Scroggins

Seyfarth Synopsis: The EEOC and the Department of Labor Wage Hour Division (WHD) have taken an important step toward inter-agency coordination, committing to information sharing, joint investigations, training, and public outreach. The Memorandum of Understanding between the EEOC and DOL contemplates referring complaints between the two agencies, a move that should catch the attention of all employers.  What is more, the agencies have agreed to share swaths of information, including EEO-1 reports and FLSA records.  This coordination will not just occur at the agency leadership level – the MOU enables front-line personnel from both agencies to receive shared information quickly and expeditiously. This enhanced and elevated level of agency cooperation should be top of mind for all employers.

On September 14, 2023, the EEOC and WHD announced that they had entered into a Memorandum of Understanding enabling information sharing, joint investigations, training, and outreach. The MOU now empowers the agencies’ field staff to coordinate efforts on both individual matters and larger investigations.

The EEOC’s press release, and some initial media coverage, have focused on the agencies’ coordinated efforts relating to the recently enacted PUMP Act (extending to more nursing employees the rights to receive break time to pump and a private place to pump at work) and the Pregnant Workers Fairness Act (requiring reasonable accommodations for limitations related to pregnancy, childbirth, or related medical conditions). But the MOU’s information-sharing and other contemplated coordinated activity provisions go far beyond those statutes, covering a broad range of activities, touching on all aspects of EEOC and WHD jurisdiction.

For example, the MOU explicitly describes that each agency will make complaint referrals to the other, and that the two will share complaint or investigative files, EEO-1 reports and FLSA records, and “statistical analyses or summaries,” and that the agencies “will explore ways to efficiently facilitate” the data sharing.

Information sharing under the MOU is not limited to just top-level agency officials in Washington, DC; leadership from each agency’s District (or Regional) offices may request information without the need to first obtain approval from HQ in Washington, DC. Importantly, the EEOC District Directors and Regional Attorneys also may designate other EEOC employees to make the request. This means that front-line EEOC staff involved in enforcement and litigation can quickly access a wide range of information held by WHD. It is also noteworthy that the MOU allows any EEOC Commissioner to directly request information from WHD, without first channeling the request through EEOC career staff. This is significant because it enables EEOC Commissioners from different political parties than the Chair to obtain information directly from WHD.

But the elephant lurking in the corner of the room may be the potential for broad-based data-sharing between the two agencies. The MOU specifically contemplates that the EEOC may share employer EEO-1 reports with WHD. Notably, Title VII prohibits the EEOC from disclosing EEO report data to the public, but the MOU does not bind the WHD in the same way. Instead, the WHD agrees to “observe” Title VII’s confidentiality requirements.

Whether these provisions of the MOU might be sufficient to ward off a FOIA request directed to WHD may, at some point, be tested in the courts. WHD’s sibling agency at the Department of Labor, OFCCP, has been involved in contested FOIA litigation seeking large volumes of EEO-1 reports in OFCCP’s possession. For more information about this litigation, see our most-recent client update on OFCCP’s release of EEO-1 reports.

Implications for Employers

Employers can expect the MOU to lead to more information sharing between the EEOC and WHD when it comes to individual charges and investigations. (The MOU contains a high-level framework for coordinated investigations involving the same employer.)  More concerning is the potential for data sharing to fuel broader systemic investigations. Indeed, as we recently wrote, the EEOC’s five-year Strategic Plan announced just last month that it is committing to developing these “big cases,” in the hope that this will enable the EEOC “to increase its impact on dismantling discriminatory patterns, practices, or policies.” The ability to gather additional data through this partnership with the WHD adds another powerful tool to the EEOC’s investigative powers. 

For more information on the EEOC and WHD, and how both may affect your business, contact the authors or a member of Seyfarth Shaw’s Complex Discrimination Litigation Group or Wage Hour Litigation Practice Group.