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CORPORATE SHAREHOLDERS AND OFFICERS MAY ONLY BE LIABLE FOR LABOR LAW (WAGE-PAYMENT-RELATED) VIOLATIONS IF THEY EXERCISE CONTROL OVER THE DAY-TO-DAY OPERATIONS OF THE CORPORATION, WHICH WAS ALLEGED HERE (SECOND DEPT).

The Second Department, reversing Supreme Court and reinstating defendants’ counterclaims alleging violations of the Labor Law, noted that corporate shareholders and officers can only be liable for Labor Law (wage-payment-related) violations if they exercise control of a corporation’s day-to-day operations, which was alleged here:

“[C]orporate shareholders and officers generally may not be subjected to civil liability for corporate violations of the Labor Law absent allegations that such persons exercised control of the corporation’s day-to-day operations by, for example, hiring and firing employees, supervising employee work schedules, and determining the method and rate of pay” … . Here, the defendants adequately alleged, inter alia, that the additional defendants controlled the day-to-day operations of the plaintiff, including the plaintiff’s payment practices. Interstate Home Loan Ctr., Inc. v United Mtge. Corp., 2022 NY Slip Op 03715, Second Dept 6-8-22

Practice Point: Corporate shareholders and officers may be liable for Labor Law (wage-payment-related) violations only if they exercise control over the day-to-day operations of the corporation.

 

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ACTION AGAINST AMAZON ALLEGING RETALIATION AGAINST WORKERS WHO PROTESTED COVID-RELATED WORKING CONDITIONS PREEMPTED BY NATIONAL LABOR RELATIONS ACT (NLRA) (FIRST DEPT).

The First Department, reversing Supreme Court, determined this action by the NYS Attorney General against Amazon alleging retaliation against workers for protesting COVID-related working conditions was preempted by the National Labor Relations Act (NLRA):

… [W]e find that the Labor Law §§ 215 and 740 claims alleging retaliation against workers based, in part, on their participation in protests against unsafe working conditions plainly relate to the workers’ participation in “concerted activities for the purpose of . . . mutual aid or protection,” i.e., activities that are protected by the NLRA … , and therefore that the claims are preempted … . Where conduct is clearly protected or prohibited by the NLRA, the NLRB, and not the states, should serve as the forum for disputes arising out of the conduct … .  People v Amazon.com, 2022 NY Slip Op 03081, First Dept 5-10-22

Practice Point: Here a state action, brought by the NYS Attorney General, against Amazon alleging retaliation against workers for protesting COVID-related working conditions was deemed preempted by the National Labor Relations Act (NLRA).

 

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LABOR LAW 198-B, WHICH PROHIBITS WAGE KICKBACKS, DOES NOT PROVIDE A FREESTANDING PRIVATE RIGHT OF ACTION (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Garcia, over an extensive two-judge dissent, determined Labor Law 198-b, which prohibits wage kickbacks, does not provide a freestanding private right of action:

Labor Law § 198-b prohibits “kickbacks” by making it unlawful for any person to “request, demand, or receive” part of an employee’s wages or salary on the condition that “failure to comply with such request or demand will prevent such employee from procuring or retaining employment.” Violation of the statute is a misdemeanor offense (see Labor Law § 198-b [5]). Labor Law § 218 also provides for administrative enforcement of section 198-b by the Commissioner of the Department of Labor. The statute empowers the Commissioner to grant affected employees restitution and liquidated damages in addition to imposing civil penalties. * * *

… [W]e apply a three-factor test to determine whether the legislative intent favors an implied right: “‘(1) whether the plaintiff is one of the class for whose particular benefit the statute was enacted; (2) whether recognition of a private right of action would promote the legislative purpose; and (3) whether creation of such a right would be consistent with the legislative scheme'” … . * * *

The statutory scheme … expressly provides two robust enforcement mechanisms, “indicating that the legislature considered how best to effectuate its intent and provided the avenues for relief it deemed warranted” … . Konkur v Utica Academy of Science Charter Sch., 2022 NY Slip Op 00911, CtApp 2-10-22

 

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PLAINTIFFS WERE ENTITLED TO SUMMARY JUDGMENT ON THEIR MINIMUM WAGE, OVERTIME PAY, SPREAD-OF-HOURS PAY AND WAGE THEFT PREVENTION ACT CAUSES OF ACTION, INCLUDING LIQUIDATED DAMAGES, PREJUDGMENT INTEREST AND ATTORNEYS’ FEES (FIRST DEPT).

The First Department, reversing Supreme Court, determined the motion court should not have denied plaintiff’s summary judgment motion and, sua sponte, dismissed the complaint in this action alleging “violations of minimum wage, overtime pay and spread-of-hours pay under the Labor Law and violations of the Wage Theft Prevention Act (WTPA) …” . The First Department granted plaintiffs’ summary judgment motion, finding them entitled to liquidated damages, prejudgment interest and attorneys’ fees:

Plaintiffs established prima facie that defendants violated Labor Law §§ 190-199, 650, and 652 and 12 NYCRR 142 and 146-1.6 by failing to pay them minimum wage, overtime pay, and spread-of-hours pay. Although 12 NYCRR 142-2.2 requires an employer to pay an employee for overtime, i.e., working time over 40 hours, at a wage rate of 1½ times the employee’s regular rate, defendant Georgios Liristis, owner of defendant GE & LO Corp. d/b/a Burger Hut, testified that plaintiffs each worked 8- to 10-hour shifts, six days a week, and were paid a fixed salary. Although 12 NYCRR 142-2.4(a) requires that, for any day in which an employee’s spread of hours exceeds 10 hours, the employee receive one hour’s pay at the minimum wage rate in addition to the minimum wage, the record shows that plaintiff Galindo Tezoco, who regularly worked shifts over 10 hours, did not receive the additional hours’ pay.

Defendant Liristis’ testimony establishes that defendants failed to pay three of the five plaintiffs the prevailing minimum wage during the relevant periods. Defendants cannot avail themselves of the “tip credit,” since they undisputedly failed to provide notice of the tip credit in writing … .

Plaintiffs established that defendants violated the WTPA by failing to provide them with wage statements (see Labor Law § 195[3]) and by failing to provide wage notices to plaintiff Silverio Tezoco … . It is undisputed that defendants failed to provide any wage notices or wage statements during the course of plaintiffs’ employment. Tezoco v GE & LO Corp., 2021 NY Slip Op 06463, First Dept 11-18-21

 

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CLAIMANT’S UNEMPLOYMENT INSURANCE BENEFITS PROPERLY REDUCED TO ZERO BECAUSE CLAIMANT’S PENSION EXCEEDED THE AMOUNT OF THE BENEFITS (THIRD DEPT).

The Third Department determined the amount of unemployment insurance benefits for claimant, a professional violinist, was properly reduced to zero based upon claimant’s pension:

Consistent with the provisions of Labor Law § 600 (1) (a), the benefit rate of a claimant who is receiving a governmental or other pension “shall be reduced . . . if such [pension] payment is made under a plan maintained or contributed to by [the] base period employer and . . . the claimant’s employment with, or remuneration from, such employer after the beginning of the base period . . . increased the amount of . . . such pension” … . “Under the plain language of the statute, the specified reduction shall be made where a claimant’s base period employer made a pension fund contribution during the base period which increased the claimant’s pension” … .

… [T]he record establishes that, during the relevant base period, claimant received a pension benefit that, in turn, was fully funded by the contributing employers. The record further makes clear — and claimant does not dispute — that the work performed by her during the base period and the corresponding contributions made by her employers increased the monetary value of her pension. Under these circumstances, and given that the prorated weekly amount of claimant’s pension benefit exceeded her weekly unemployment insurance benefit (see Labor Law § 600 [1] [b]), the statutory reduction was triggered, and claimant’s unemployment insurance benefit rate was properly reduced to zero … . Matter of Morganstern (Commissioner of Labor), 2021 NY Slip Op 06416, Third Dept 11-18-21

 

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THE PURCHASE OF A CHECK CASHING BUSINESS DID NOT TRANSFER THE UNEMPLOYMENT INSURANCE OBLIGATIONS OF THE SELLER TO THE PURCHASER; THE LABOR LAW 581 CRITERIA FOR THE TRANSFER OF UNEMPLOYMENT INSURANCE OBLIGATIONS WERE NOT MET (THIRD DEPT).

The Third Department, reversing the Unemployment Insurance Appeal Board, determined the unemployment insurance obligations of PTL Check Cashing Corp. were not transferred to PLS Check Cashiers of New York Inc. when PLS entered an asset purchase agreement with PTL in order to acquire PTL’s license to operate at PTL’s former location in the Bronx:

“Labor Law § 581 establishes an experience-rating system that allows for variations in the unemployment insurance contribution rates from the standard rate of qualified employers in certain situations” … . Under the statute, when a business is transferred either whole or in part from one employer to another, the transferee shall take over and continue the unemployment insurance experience account of the transferor … . A transfer, however, will not be deemed to have occurred if (1) the transferee has not assumed any of the transferor’s obligations, (2) the transferee has not acquired any of the transferor’s goodwill, (3) the transferee has not continued or resumed the transferor’s business either in the same establishment or elsewhere, and (4) the transferee has not employed substantially the same employees as those of the transferor … . …

It is undisputed that PLS did not assume any of PTL’s financial obligations and did not hire any of its employees. Moreover, while PLS operated from the same Bronx location, its business included a variety of financial services and was not limited to check cashing, which was PTL’s sole business. Significantly, the ability to operate from the Bronx location was necessary in order for PLS to obtain a license from the Department of Financial Services given the geographic limitations applicable to businesses that offer check cashing services. Although the asset purchase agreement listed other property included in the sale, PLS’s president testified that the tangible assets were disposed of and the only asset that was of value was the opportunity to acquire the license to operate from the Bronx location. Notwithstanding the fact that goodwill was generally referenced as property included in the sale, PLS did not use PTL’s brand, logo or phone number and had its own customer base, negating any expectation that it would be patronized by PTL’s customers. In view of the foregoing, substantial evidence does not support the Board’s finding that a transfer of business occurred under Labor Law § 581 (4) such that PLS acquired the unemployment insurance experience rating of PTL … . Matter of PLS Check Cashiers of N.Y. Inc. (Commissioner of Labor), 2021 NY Slip Op 05142, Third Dept 9-30-29

 

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PLAINTIFF STATED CAUSES OF ACTION FOR VIOLATION OF LABOR LAW 193, IMPROPER DEDUCTIONS FROM WAGES, AND LABOR LAW 215, TERMINATION FOR COMPLAINING OF THE IMPROPER DEDUCTIONS (FIRST DEPT).

The First Department, reversing Supreme Court, determined plaintiff had stated causes of action for violation of Labor Law 193 by making improper deductions from earned wages, and Labor Law 215, by firing plaintiff after she complained of unlawful deductions:

… [P]laintiff alleged that defendants “impermissibly and unlawfully made deductions from [her] wages including the operating costs and expenses of OFRM [her employer] such as, among other things, credit card fees, bank services bills and electric bills.” She also alleged that her draw and net bonus payments constituted “earned wages,” and that defendants had “unlawfully made deductions from [her] [w]ages.” …

Under Labor Law § 193(1)(b), “[n]o employer shall make any deduction from the wages of an employee, except deductions which . . . are expressly authorized in writing by the employee and are for the benefit of the employee.” In order to state a claim for a violation of § 193, “a plaintiff must allege a specific deduction from wages and not merely a failure to pay wages” … . Additionally, a “‘deduction is more targeted and direct than the wholesale withholding’ of wages” … . * * *

Labor Law § 215 provides, in pertinent part, that no employer “shall discharge, threaten, penalize, or in any other manner discriminate against any employee (i) because such employee has made a complaint to his or her employer . . . that the employer has engaged in conduct that the employee, reasonably and in good faith, believes violates any provision of [the Labor Law].” Schmidt-Sarosi v Offices for Fertility & Reproductive Medicine, P.C., 2021 NY Slip Op 03564, First Dept 6-8-21

 

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THE TRANSFER OF CERTAIN ASPECTS OF SELLER’S BUSINESS TO BUYER DID NOT MEET THE CRITERIA IN LABOR LAW 581; THEREFORE THE TRANSFER DID NOT TRIGGER THE TAKEOVER OF THE SELLER’S UNEMPLOYMENT INSURANCE EXPERIENCE ACCOUNT (THIRD DEPT).

The Third Department, reversing Supreme Court, determined that the HOP’s purchase of certain aspects of a competing business, Playground, did not trigger HOP’s takeover of Playground’s unemployment insurance experience account:

The statute provides that where a business has been transferred from one employer to another, either in whole or in part, the transferee shall take over and continue the unemployment insurance experience account of the transferor (see Labor Law § 581 [4] [a] …). A transfer, however, will not be deemed to have occurred “if the transferee has not assumed any of the transferring employer’s obligations, has not acquired any of the transferring employer’s good[]will, has not continued or resumed the business of the transferring employer either in the same establishment or elsewhere, and has not employed substantially the same employees as those of the transferring employer” … . To negate a transfer, all four of these requirements must be met … . …

… [U]ndisputed evidence was presented that, in connection with its purchase of assets from Playground, HOP did not assume any of Playground’s obligations, did not continue or resume operation of Playground’s screening room … and did not retain any of Playground’s employees. The sole basis upon which the Board concluded that a transfer had occurred was HOP’s alleged acquisition of Playground’s goodwill. The record, however, does not support the Board’s finding in this regard.

The asset purchase agreement did not identify goodwill as an asset encompassed by the agreement, nor was it specifically mentioned on the list of property set forth on schedule 2.1 of the agreement. Matter of HOP N.Y. Entertainment, LLC (Commissioner of Labor), 2021 NY Slip Op 03093, Third Dept 5-13-21

 

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IN AN ACTION BY CATERING WAITSTAFF SEEKING TIPS ALLEGEDLY WITHHELD BY THE EMPLOYER IN VIOLATION OF THE LABOR LAW, THE EMPLOYER CANNOT SEEK INDEMNIFICATION FROM A CONTRACTOR WHICH SUPPLIED CATERING STAFF TO THE EMPLOYER (FIRST DEPT). ​

The First Department, in a full-fledged opinion by Justice Kern, in a matter of first impression, determined that an employer (Great Performances) cannot seek indemnification from from a contractor (Kensington) for alleged violations of the Labor Law. The plaintiffs alleged Great Performances kept tips which should have gone to tie waitstaff. Kensington had supplied staff to Great Performances for catered events:

We … find that Great Performances’ third-party complaint was properly dismissed as against Kensington on the ground that an employer has no right to contractual indemnification from a third party for claims brought pursuant to NYLL [New York Labor Law] 196-d because indemnification under that statute, whether contractual or otherwise, is against public policy. * * *

The policies behind the statute sought to ensure that employers be held accountable for any wage violations and are not permitted to contract away liability. Indeed, holding that an employer has a right to contractual indemnification from a third party for claims brought pursuant to NYLL 196-d would undermine the employer’s willingness to comply with its obligations under the statute. Robinson v Great Performances/Artists as Waitresses, Inc., 2021 NY Slip Op 02769, First Dept 5-4-21

 

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PLAINTIFF POLICE OFFICER WAS INJURED CHANGING THE CARBON DIOXIDE CARTRIDGE FOR AN ANIMAL TRANQUILIZER GUN; THE PRODUCTS LIABILITY CAUSE OF ACTION AGAINST THE MANUFACTURER SURVIVED SUMMARY JUDGMENT; THE GENERAL MUNICIPAL LAW 205-E/LABOR LAW 27-A CAUSE OF ACTION AGAINST THE CITY SHOULD NOT HAVE BEEN DISMISSED (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined the negligence and products liability causes of action against NASCO, the manufacturer of an animal tranquilizer gun, properly survived summary judgment, but the General Municipal Law/Labor Law action against the city and the NYPD should not have been dismissed. Plaintiff, a police officer, was injured changing the carbon dioxide cartridge for the gun:

NASCO’s expert … opined in mere conclusory fashion that the tranquilizer gun was “appropriately designed.” The affidavit did not, for example, contain any explanation of the gun’s design, or any discussion of industry standards or costs. Nor did it state whether NASCO had received complaints about any of the other tranquilizer guns it had sold. The conclusory affidavit was insufficient to affirmatively demonstrate, prima facie, that the gun was reasonably safe for its intended use … .

NASCO … failed to demonstrate, prima facie, that the plaintiff’s actions were the sole proximate cause of the subject accident … . Triable issues of fact existed, among other things, as to whether the plaintiff was given specific instructions by the NYPD that he failed to follow or whether he used a tool to remove the end cap. …

NASCO, which relied primarily on an instruction sheet produced by the NYPD that the plaintiff testified was never given to him, failed to meet its burden of establishing, prime facie, that the warnings provided to the NYPD were adequate, that no warnings were necessary, or that the failure to give the aforesaid warnings was not a proximate cause of the accident … .

…The City defendants failed to demonstrate their prima facie entitlement to judgment as a matter of law dismissing so much of the General Municipal Law § 205-e cause of action as was predicated upon Labor Law § 27-a. The City defendants failed to demonstrate, prima facie, that the tranquilizer gun, which was purchased by the NYPD in 1976, was not defective due to lack of proper maintenance, as alleged by the plaintiff … . Further “[r]ecovery under General Municipal Law § 205-e ‘does not require proof of such notice as would be necessary to a claim in common-law negligence'” … .”Rather, the plaintiff must only establish that the circumstances surrounding the violation indicate that it was a result of neglect, omission, or willful or culpable negligence on the defendant’s part” … . Morales v City of New York, 2021 NY Slip Op 02386, Second Dept 4-21-21

 

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