New Employee Wage Lien Law Expected Shortly

07.09.2019

New York State Governor Cuomo is expected to sign a bill granting employees and former employees the power to lien real and personal property owned by their (broadly defined) employers based on their mere allegation of a wage claim. Entity and individual business owners, as well as managers, executives, supervisors and human resources professionals who control the terms and conditions of employment, and thus also considered employers, could face these liens under the law which will be effective 30 days after signed by the Governor. Employees also have the right under the new law to access employer information on the names of shareholders, members, owners etc., and the personal liability of the 10 largest shareholders of New York corporations for unpaid wages if the corporation cannot pay is expanded by the new law to include liquidated damages, penalties, interest, attorneys’ fees, and costs. Employers subject to these liens will be forced to purchase a bond or seek court intervention to remove the lien. Given that personal property like cars, boats etc. is also subject to this new law, employers may well have more reason to bond the lien than is typical in the real-property-only mechanics’ liens. Remarkably, there is no salary maximum for employees seeking to file a lien under the new law, so executives are as eligible to do so as minimum wage employees.

The definition of “wage claim” under the new law is also broad. It encompasses claims under the New York Labor Law and the federal Fair Labor Standards Act for unpaid wages, overtime, spread of hours, call-in pay, uniform maintenance pay, withheld gratuities, unlawful deductions from wages, unpaid charges that purport to be gratuities, improper meal and tip credits, employment contract breaches and Commissioner of Labor Wage Order violations. The New York State Department of Labor (“DOL”) or Attorney General (“AG”) could file the lien or liens on the employee’s (or class of employees’) behalf if there has been a complaint filed with either of them.

Procedurally, the filed lien may include any liquidated damages and must be filed within three years of the end of employment. It must be served on the employer within five days before or 30 days after filing with the County Clerk, and proof of service of the lien must be filed within 35 or the lien will expire automatically. The lien lasts one year and can be extended by court order or automatically until the end of any proceeding brought by the employee in court, arbitration, or before the DOL or AG. Otherwise, the lien will expire at the end of the one year unless an action is brought to foreclose on the lien within that time. A small consolation for employers in the new law is that if the employee willfully exaggerates the lien, the lien is discharged, and the employee cannot file another. However, it is not known if the employer, in that instance, would have a claim for its costs, fees, and damages in such a situation as owners do in similar mechanics’ lien instances and thus the deterrence against exaggerated liens is minimal.

More than ever, employers must audit their employee compensation practices ensuring compliance as best they can to avoid liens on their personal and/or real property. For any uncertainty as to the applicable law governing the compensation practices, experienced employment counsel should be consulted.

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