What’s your favorite April Fool’s prank? This year, I was almost done in by the social media post shown above, but managed to avoid clicking the “link” at the last second.
Unfortunately, in my practice as an employment lawyer I have come across many situations where employers have been “fooled” by tricky compliance issues. These often come up in the wage and hour context, where even sophisticated and well-meaning companies can be tripped up by a maze of different state and local requirements. While there are too many of these to identify comprehensively in a single April-fool’s themed blog, here are a few not-so-greatest hits.
It’s standard to pay employees on a biweekly basis, so doing so couldn’t be ground for penalties, right? Wrong – at least for “manual workers” in New York State. The New York State Labor Law (Section 191) requires manual workers (generally defined to include employees who spend more than 25% of their working time performing physical labor) to be paid weekly, and no later than 7 calendar days after the end of the week in which wages were earned. While Governor Hochul signed a law last year capping penalties for first-time violators to 100% of lost interest (as opposed to the prior law, which allowed costlier liquidated damages equal to the full amount of the late wages) employers remain exposed to potential class-action liability – and liquidated damages can still be awarded for repeat offenders.
Honorable mention goes to New York City’s notice limitations on shift changes for fast-food and retail workers, and other requirements which Mayor Mamdani’s administrative has been aggressively enforcing. Employers hit with penalties were probably not chuckling when the mayor took to YouTube Live to discuss those recent actions while eating a Crunchwrap Supreme.
Let’s say you have to terminate an employee on Wednesday on short notice for a conduct violation. And let’s say you pay employees on Friday. You can terminate the offending employee on Wednesday and issue them their final paycheck on Friday, right? Wrong – at least in Massachusetts. Massachusetts law states that employees who are fired or laid off must receive all of their wages on their last day of work (employees who resign, on the other hand, must be paid by the next regular pay day). Worse yet, late payment automatically incurs triple damages, resulting in a potential windfall to the employee. Massachusetts also includes earned but unused vacation time in its definition of “wages” and allows employees to recover their attorneys’ fees in lawsuits for unpaid wages. This law has been interpreted by courts to require employers to pay out excess vacation time on the employee’s last day—even if company policy explicitly states that such time is not payable upon termination.
While not all states have penalties as strict as Massachusetts, various other states require payment to terminated employees on the day (or day after) termination, including California, Colorado, Connecticut, the District of Columbia, Hawaii, Minnesota, Missouri, Nevada, Oregon, and Utah. And various other states, including California, Colorado, and Illinois, mandate payment of accrued vacation time upon separation of employment—even if a contract or policy states that such time is not payable when an employee departs.
Many companies rely on consultants and independent contractors, and often pay those workers a flat rate without overtime, benefits, or withholdings for workers’ compensation, disability/family leave insurance, and FICA taxes. Some employers believe that their consultants and contractors perform their duties with enough independence and discretion that a regulator would not deem them to be employees. While this independence can be sufficient in some states, New Jersey is not one of them. In the Garden State, all workers are presumed to be employees unless the employer can meet all three prongs of the stringent “ABC test”: (A) the worker is free from control or direction in the performance of their work; (B) the worker’s services are either outside the usual course of the employer’s business, or performed outside all of the employer’s places of business; and (C) the worker is engaged in an independently established trade, occupation, or business. Requirements (B) and (C) can often trip up employers, particularly if the worker performs work at a typical place of business for the employer or the worker doesn’t have other active clients or customers. Even if the worker prefers to be an independent contractor and the company and the worker enter into an agreement confirming this, the employer must still satisfy the ABC test based on the worker’s actual duties.
Notably, the ABC test applies to New Jersey minimum wage and overtime law claims, which means that misclassification in New Jersey is subject to the state’s harsh penalties for wage law violations. After a 2019 statutory amendment, NJ law now provides that if an employer fails to pay an employee wages (including overtime pay) the employee can recover both the wages owed, and liquidated damages of 200% of lost wages, plus reasonable costs and attorneys’ fees. In addition to private suits, the New Jersey Department of Labor can audit or bring enforcement actions against employers for failing to contribute into the state’s temporary disability and family leave insurance programs for misclassified employees.
Last but certainly not least, California labor law remains a compliance challenge for employers. One of California’s many wage and hour mandates is the requirement of at least one 30-minute (unpaid) meal break for shifts of over 5 hours per day, and at least one 10-minute (paid) rest break for shifts over 3.5 hours per day. Employers must pay each employee a premium of a full hour’s pay for each late, denied, or shortened meal break. While federal wage and hour law will sometimes apply a “de minimis” rule to excuse non-payment for very short periods of time worked (such as booting up a computer), this rule doesn’t apply to California state law regarding meal and rest breaks. Thus, California courts have rejected employer policies that round meal breaks up or down to the nearest 5 or 10 minutes. This means that employers may be in violation if they aren’t paying premiums to employees who take 28- or 29-minute meal breaks.
Another area where CA employers can be fooled is wage statements. California law requires wage statements (i.e. pay stubs) to include nine separate categories of information, including gross wages earned, hours worked, deductions, net wages, applicable hourly rate, and the full legal name and address of the employer. Employers who violate these requirements face monetary penalties that seem relatively modest on their own ($50 for the first violation and $100 per employee for subsequent pay periods) but can add up quickly and also form the basis of a collective action under the Private Attorneys General Act (PAGA), a popular vehicle for lawsuits in California.
Speaking of final payment rules, California isn’t just strict about paying terminated employees. When employees without written contracts quit, the employer must pay final wages within 72 hours. Furthermore, if the employee gives 72 hours’ advance notice of resignation, the employer must issue payment at the time employment ends.
If your company has employees in any of the states mentioned above, please accept my best wishes for avoiding being “fooled” this year. Identifying these issues before hiring or firing employees in these jurisdictions, and obtaining timely advice from your employment counsel, can make the difference between a laughing matter and a costly slip-up.
The information contained in this publication should not be construed as legal advice, is not a substitute for legal counsel, and should not be relied on as such. For legal advice or answers to specific questions, please contact one of our attorneys.
Ivo is a partner in Obermayer’s Labor Relations & Employment Law Department. He focuses his practice on representing employers, including advising companies on how to handle employee issues, and defending employee claims...
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