Tue, 09/20/2011 - 14:01

Part of my practice involves representing employers and employees in employment disputes. Many of these cases involve disagreements about whether the employer paid the employee all compensation the employee believes was due. New York law provides several statutory causes of action for employees who are not paid compensation, including New York Labor Law section 198(1-a). That section, until recently, provided a cause of action to an employee for unpaid “wages” that, if successful, included “liquidated damages” (a bit of a misnomer) of 25% of the unpaid wages, plus the unpaid wages, plus attorney’s fees.

On December 10, 2010, the New York Legislature amended section 198(1-a) to increase the “liquidated damages” available to wronged employees to 100% of the unpaid wages, bringing the available damages in line with federal legislation. In essence, the statute now provides for double damages for unpaid wages. The recent amendment made no other substantive changes to section 198(1-a) and took effect on April 9, 2011.

A major issue that always gets played out in the courts with such amendments is whether the increased damages should be available to claimants whose claims accrued prior to the effective date. The general rule in New York law is that legislative amendments are forward-looking only and do not apply retroactively unless the Legislature explicitly provides for retroactive application. However, where an amendment is deemed “remedial” only, rather than substantive, the presumption is that the amendment should be given retroactive effect. The test is whether the amendment creates a new cause of action, diminishes or eliminates defenses, or creates new substantive obligations for those regulated by the statute. Where the change only modifies available damages without imposing new or different legal obligations, however, courts generally apply such amendments to claims that accrued prior to the effective date of the amendment.

Two recent court cases have now considered whether the recent amendment to section 198(1-a) should be applied retroactively or prospectively only, and the two courts (one state, one federal) have come to opposite conclusions.

In Wicaksono v. XYZ 48 Corp., 2011 U.S. Dist. LEXIS 55771 (S.D.N.Y. May 2, 2011), a federal magistrate judge held that the recent amendment to section 198(1-a) should only apply prospectively to claims for unpaid wages accruing on or after April 9, 2011. Noting that the legislative history of the amendment gave no insight into the Legislature’s intent, the court recited the general rule against retroactive application of statutory amendments and found that nothing in the legislative history expressed or implied any intent to make the increased damages available to claimants whose injuries occurred prior to April 9, 2011, the effective date of the amendment. The court did not discuss the well-known exception providing for retroactive application of purely remedial statutes.

A few months later, Justice Solomon of the New York County Supreme Court reached the opposite conclusion in Ji v. Belle World Beauty, Inc., Index No. 603228/2008 (N.Y. Co. Sup. Aug. 22, 2011). Justice Solomon found the amendment increasing available damages for a violation of section 198(1-a) to be a purely remedial change and subject to the general presumption in favor of retroactive application for such amendments.

Employers and employees, in these cases and others winding their way through New York courts, will no doubt clash on this issue until an appellate court hears and decides the question. Each side has non-trivial arguments to brandish in their favor. One thing to note, however, is that the New York Legislature could have easily stated its intent, either for or against retroactive application, in the act that amended section 198(1-a). The importance of this question could not have escaped the various committees that drafted and studied the amending act. The Legislature’s failure to address the issue explicitly in the act could only lead to time-consuming, pointless litigation that could have easily been avoided. A direct expression of intent would also have avoided putting courts in the position of guessing about what the Legislature intended. It is an abdication of the legislative role to leave such questions to judicial guesswork.