Authored by Aaron Warshaw

In the first reported decision to address the retroactivity of the New York Wage Theft Prevention Act (“Act”), a state trial judge has ruled that the Act’s provision increasing liquidated damages from 25% to 100% applies to Labor Law violations occurring prior to the Act’s April 9, 2011 effective date.  As we have previously reported, the Act substantially amends various aspects of New York’s wage and hour law.

Justice Jane Solomon issued the decision addressing the retroactivity of the Act’s liquidated damages provision in Ji v. Belle World Beauty, Inc., No. 603228/2008 (N.Y. Sup. Ct., N.Y. Cnty., Sept. 22, 2011), in response to the plaintiffs’ motion to amend their complaint to “reflect recent amendments” under the Act.  In pertinent part, the plaintiffs sought to amend their complaint to seek “100%” rather than “25%” liquidated damages under their New York wage claims.  Although the case was filed well before the Act took effect, Justice Solomon granted the motion.  She first noted that the “general rule that a statute should be construed as prospective unless the language of the statute, either expressly or by direct implication, requires a retroactive constructive.”  However, the judge also noted that “remedial statutes are given retroactive construction to the extent that they do not impair vested rights or create new rights.”  The court then reasoned that the Act was remedial in nature, that the increase in liquidated damages does not affect any of the defendants’ vested rights, and that the provision does not create a new right of recovery.  As a result, Justice Solomon held that the increase in liquidated damages applies retroactively and permitted the plaintiffs to amend their complaint to reflect this change.

Although the 100% liquidated damages provision applicable to violations of the New York Labor Law is the same rate for liquidated damages under the Fair Labor Standards Act, the potential impact of the Act is considerably greater because New York’s statute of limitations for wage violations is six years, compared to two or three years under the FLSA.  This particular issue did not arise in Ji because the alleged wage underpayments occurred in 2007, only one year prior to the date the action was filed.  Nonetheless, the decision raises the risk that retroactive 100% liquidated damages might apply not only to actions pending as of April 2011, but also to acts occurring well beyond the federal three-year statute of limitations.

The decision also reflects a broader willingness of New York courts to retroactively apply changes to labor and employment laws absent express statutory language to the contrary.  Another recent example can be found in Nelson v. HSBC Bank USA, No. 2009-04273 (N.Y. App. Div., 2nd Dep’t, Sept. 13, 2011), where an intermediate appellate court held that 2005 changes to New York City’s human rights law apply retroactively to an action brought in 2003.  However, as we recently reported, this approach stands in contrast to a recent decision in which Massachusetts’ highest court held that a statute mandating automatic treble damages for wage and hour violations applies only to conduct occurring after the new law’s effective date because the change was substantive rather than procedural or remedial.