New York employers are often surprised to learn that wage law violations can lead to criminal penalties in addition to financial penalties. Whether payroll is outsourced, or a staffing agency oversees the entire HR process, business owners are still responsible for these violations. In fact, New York State has some of the most onerous employment laws safeguarding wage payment in the nation.
For example, our Business Corporation Law provides that the ten largest shareholders of a corporation are personally responsible for the wages of their employees, and therefore, can be personally liable for any unpaid amounts.
New York State Labor Law imposes criminal sanctions on employers who fail to pay wages by making the first violation a misdemeanor and a second (occurring within six years) a felony. These violations carry a maximum penalty of one year and a day in prison as well as a $20,000 fine.
Recently, on September 6, 2023, Governor Kathy Hochul signed further legislation amending our Penal Law to provide that “wage theft” is a form of criminal larceny. This amendment now specifically provides that the withholding of “compensation for labor services” meets the definition of larceny. In addition, the law now references “larceny by wage theft” as the failure to pay a person performing services “at the minimum wage rate and overtime, or promised wage”, whichever is greater.
Given the personal risk involved, employers and their top shareholders will do well to regularly ensure that proper wage payments are being made to their employees, as well as seeing to it that required records are always maintained. Whether third-party payroll or staffing services are involved, remember that the employer bears direct responsibility (both financially and criminally) for violations under these laws.
