New York Court Applies Wage Theft Protection Act and New Rules Regarding Retaliation for Verbal Complaints Retroactively

Ji v. Belle World Beauty, Inc., Supreme Ct., NY County (8/24/2011) 

On August 24, 2011 the New York State Supreme Court for New York County issued a decision which, if upheld, significantly increases employer penalties for failing to properly pay employees minimum wages and overtime.

Plaintiffs Ji and Zhu worked as nail technicians for defendants. They were terminated in October and September, 2007, respectively, within weeks after having verbally complained to defendants that they were not being paid properly. (Plaintiffs allegedly received a “daily rate” of pay without regard to the number of hours they actually worked, a clear violation of the Federal Fair Labor Standards Act and its New York State equivalent.) They sued their employer in 2008.

Until April, 2011, employees suing for unpaid overtime wages could recover the amount of wages plus liquidated damages of 25%, which is what plaintiffs requested. However, in April, 2011 New York’s Wage Theft Protection Act (WTPA) became effective. The WTPA increased the liquidated damages available to successful plaintiffs to 100% of the overtime owed. Plaintiffs sought to amend their complaint to seek the additional liquidated damages, even though they hadn’t worked for the defendant employer since 2007.

The New York County Supreme Court (Solomon, J.) found that the WTPA was meant to be a remedial statute, and should be construed retroactively to the extent it did not create new rights or impair vested rights. Justice Solomon held that no new or vested rights would be affected, and overruled the employer’s objection to applying the 100% liquidated damages provision retroactively.

Justice Solomon also permitted plaintiffs to amend their complaint to allege that they were fired in retaliation for their verbal wage complaints. Until recently, established Second Circuit law was that a verbal complaint would not be an act subject to possible retaliation. Lambert v. Genesee Hosp., 10 F.3d 46 (1993). However, the U.S. Supreme Court recently reversed this rule. Kasten v. Saint-Gobain Performance Plastics Corp., 131 S. Ct. 1325 (March 22, 2011). Justice Solomon held that the employer’s termination of plaintiffs in 2007, over three years prior to the change in the rule, could constitute retaliation for their verbal wage complaints.

The State statute of limitations is six years. This decision, if upheld by New York’s appellate courts, will significantly increase the exposure of any New York State employer who fails to pay overtime properly.