New York Legislature Passes Wage Payment Integrity Act

The New York Legislature recently passed the Wage Payment Integrity Act (the “Act”).  If Governor Kathy Hochul signs it into law, it would expand employee compensation protections under the New York Labor Law (“NYLL”).  Among other changes, the Act would broaden the statutory definition of “wages,” establish new disclosure requirements for discretionary compensation, and strengthen protections relating to written compensation terms.

The Act would take effect immediately upon becoming law and would apply to actions filed on or after its effective date.

Expanded Definition of “Wages”

The Act would expand the NYLL’s definition of “wages” to expressly include any employment compensation that is not payable at the employer’s “sole and absolute discretion.”

To exclude a bonus or other payment from the definition of “wages” as purely discretionary, an employer would have to notify the employee in a “clear, prominent, timely and uncontradicted” manner that the employer has “sole and absolute discretion to decide whether or not to pay” the compensation.  Further, the relevant inquiry would look past the language of the agreement to whether the employer has also, in practice, clearly and consistently retained sole and absolute discretion over whether the compensation will be paid.

These proposed changes could have significant implications for bonuses and other incentive compensation.  They could conceivably bring otherwise discretionary compensation into the definition of protected wages even if such compensation depends on subjective factors.  It also could turn discretionary compensation into protected wages based on the employer’s past practice.

Written Compensation Terms

The Act would also impose consequences where an employer fails to produce written employment terms required under the NYLL.  Specifically, if an employer cannot produce required written employment terms at the request of an employee or the New York State Commissioner of Labor, the Act would create a rebuttable presumption that the terms presented by the employee reflect the parties’ agreement.

What Employers Should Do Now

Because the Act would take immediate effect if signed into law, New York employers should consider preparing now by:

• Reviewing bonus, incentive and other compensation arrangements and related documentation to ensure discretionary compensation provisions are clear, consistent, and expressly reserve the employer’s sole and absolute discretion over whether to make the payment;
• Reviewing compensation-related communications and practices to ensure they do not contradict written provisions reserving the employer’s discretion; and
• Maintaining complete and accurate written records of employees’ compensation terms.

If you have any questions related to the foregoing, please reach out to any member of our Employment team below.