As part of the New York State Budget Bill, Governor Kathy Hochul and members of the Assembly and Senate agreed to amend New York Labor Law §198(1-a) to eliminate liquidated damages for first-time pay frequency claims.
Background
New York Labor Law §191 requires that for-profit employers pay "manual workers" "weekly and not later than seven calendar days after the end of the week in which the wages are earned." Under the Labor Law, a "manual worker" is defined as "a mechanic, workingman or laborer."According to the New York State Department of Labor (NYSDOL), individuals who spend more than 25% of working time engaged in "physical labor" fall within the meaning of the term "manual worker," and the term "physical labor" has been interpreted broadly to include countless physical tasks performed by employees.
In instances where manual workers were paid late but in full, the NYSDOL long had interpreted the Labor Law to limit the employer's liability to an administrative civil penalty imposed by the NYSDOL.
Conflicting Caselaw
Significantly, in 2019, in Vega v. CM & Associates Construction Management, LLC, 175 A.D.3d 1144 (1stDep't 2019), the Appellate Division, First Department held that manual workers who were paid late had a private right of action under the New York Labor Law to recover liquidated damages—an extra payment typically equal to 100% of the of the total amount due—for up to the six-year statute of limitations. However, in Grant v. Global Aircraft Dispatch, Inc., 223 A.D.3d 712 (2nd Dep't 2024), the Appellate Division, Second Department expressly rejected the Vega Court's reasoning and held that §198 does not create a private right of action for pay frequency violations when the employee is paid in full.
Budget Bill Amendment: A Middle Ground
On May 9, 2025, Governor Hochul signed into law an amendment to Labor Law §198(1-a) (the Amendment), which provides that liquidated damages will not be available for an employer's first pay frequency violation where such employer paid the employee on a regular payday that was no less frequent than semi-monthly. In such instances, the damages will be limited to the "lost interest found to be due for the delayed payment of wages calculated using a daily interest rate for each day payment is late." This interest will be calculated based on the annual rate of interest set by the New York State Department of Financial Services, which currently is 16%.
An employer with one or more prior wage frequency violations will still be subject to liquidated damages equal to 100% of the late wages. This applies to conduct occurring after May 9, 2025, the effective date of the Amendment, against employers who, after the effective date, have been subject to one or more previous court or NYSDOL findings and orders for violations of pay frequency rules for which no proceeding for administrative or judicial review is pending and the time to commence such proceeding shall have expired and relating to employees performing the same work.
Finally, the Amendment took effect immediately and applies to "causes of action pending or commenced on or after" May 9, 2025.
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