Key Takeaways
- The New York Legislature has passed Senate Bill 2236-A, the Wage Payment Integrity Act (the Act), which would expand the definition of “wages” under the New York Labor Law (NYLL) to include bonuses and other employment compensation not payable at the employer’s sole and absolute discretion.
- If signed into law, the Act would require employers seeking to preserve discretion over bonuses and other compensation to clearly and consistently communicate that any such payments are subject to the employer’s sole and absolute discretion.
- The Act would also strengthen the consequences for failing to maintain or produce written employment terms required by NYLL Section 195 and clarify that higher-earning executive, administrative, and professional employees may pursue civil remedies relating to unpaid benefits and wage supplements despite the inapplicability of NYLL Section 198-c’s criminal penalties.
Overview
The New York Legislature has passed Senate Bill 2236-A, known as the Wage Payment Integrity Act. The Act would amend Sections 190, 195 and 198-c of the NYLL and materially affect how employers characterize, communicate, and document bonuses and other forms of compensation. The underlying bill passed both legislative chambers on Sept. 8 but the governor has not yet signed them into law.
According to its sponsors, the Act is designed to address recurring litigation over whether bonuses and other incentive compensation qualify as wages protected under Article 6 of the NYLL. According to the Act’s justification memorandum, courts have interpreted Article 6 too narrowly by excluding certain promised bonuses from wage-payment protections simply because they depend on factors other than an individual employee’s performance. The sponsors contend that this judicial interpretation does not reflect modern compensation arrangements, which frequently depend on team results, company performance, profitability, or market conditions, and the goal of the Act is to address this reality.
The Act would also both strengthen the consequences for employers that fail to maintain or produce written employment terms required by NYLL Section 195, which requires employers to provide specified wage notices and compensation information to employees and maintain related employment records, and expand the availability of civil remedies under NYLL Section 198-c for certain executive, administrative, and professional employees seeking unpaid benefits and wage supplements.
If signed into law by the governor, the Act will take effect immediately and apply prospectively to actions filed on or after its effective date.
Expanded Definition of ‘Wages’ and New Notice Requirement
NYLL Section 190 currently defines “wages” as “the earnings of an employee for labor or services rendered, regardless of whether the amount of earnings is determined on a time, piece, commission, or other basis,” as well as benefits or wage supplements defined under NYLL Section 198-c, subject to specified statutory exceptions. The Act expands the existing definition to expressly include “any employment compensation that is not payable at the employer’s sole and absolute discretion.”
In addition, the Act would impose a new notice requirement for employers seeking to exclude a bonus or other form of employment compensation from this definition of “wages.” Specifically, an employer would need to notify employees in a “clear, prominent, timely and uncontradicted” manner that the employer retains “sole and absolute discretion to decide whether or not to pay” the bonus or other discretionary compensation.
Practical Impact of the Expanded Definition of ‘Wages’ and the Notice Requirement
As outlined above, a central premise of the Act is that compensation should not lose wage-payment protection simply because it depends on factors beyond an individual employee’s performance. To illustrate that point, the Act’s justification memorandum provides the example of a portfolio manager whose bonus is tied both to the manager’s performance and to the overall performance of the employer. According to the Act’s sponsors, such compensation would constitute wages unless the employer clearly communicated from the outset that the payment remained entirely discretionary at the employer’s sole discretion.
The same reasoning could apply to compensation tied to departmental performance, company profitability, team sales, or other collective metrics. The critical inquiry will be whether the employer retained and clearly communicated sole and absolute discretion over the payment, rather than whether the compensation was based solely on the employee’s individual performance.
Presumption Based on Missing Written Terms
The Act also increases the consequences for an employer’s failure to maintain or produce written employment terms as required by NYLL Section 195. Under the Act, if an employer does not produce those terms when requested by the commissioner of labor or by an employee, a rebuttable presumption arises that the employee’s version of the employment compensation terms reflects the agreed-upon terms with the employer.
Civil Remedies for Higher-Earning Employees
The Act also seeks to amend NYLL Section 198-c(3), which addresses agreed-upon benefits and wage supplements while providing criminal penalties for certain wage violations. Under current law, certain executive, administrative, and professional employees earning more than $1,300 per week are excluded from coverage. The Act clarifies that, although those employees remain outside the scope of the criminal enforcement provisions, they may nevertheless pursue civil claims against their employers relating to unpaid benefits and wage supplements.
Effective Date and Employer Considerations
If signed into law, the Act will take effect immediately but would only apply to actions filed on or after the effective date, and it will significantly affect how New York employers structure and communicate bonus, incentive, commission, and other supplemental compensation arrangements. In anticipation of the Act’s passage and implementation, employers should begin reviewing existing compensation programs and ensure that any intended reservation of discretion is clear and prominent, communicated timely, and consistently reflected in any plans, policies, and employee communications.
Should you have any questions about the Act, BakerHostetler’s Employment Team is ready to assist.
