NYS Legislature and Governor Hochul Reach Agreement in State Budget to Limit Damages on Frequency-of-Pay Cases

Update: Governor Hochul signed Chapter 56 of the Laws of 2025 (Part U) into law on May 9, 2025.

In a significant development for New York employers, the New York State Legislature and Governor Kathy Hochul have agreed to amend the New York Labor Law (NYLL) to limit the damages available in so-called “frequency-of-pay” actions brought by employees alleging that their employer failed to pay them wages within the time frame set forth by the applicable statute. The majority of these claims are brought by “manual workers,” as Section 191 of the NYLL requires employers to pay manual workers weekly—“not later than seven calendar days after the end of the week in which the wages are earned.”¹ This amendment, which applies expressly to pending actions, introduces a tiered structure for calculating damages and aims to address longstanding concerns about employer liability under the NYLL. Significantly, it provides a measure of relief for employers that have taken proactive measures to comply with NYLL § 191 (1)(a), but still face potential liability given New York’s six-year statute of limitations.

History of Frequency-of-Pay Actions in New York State

Following the New York State Appellate Division, First Department’s 2019 decision in Vega v. CM & Associates Construction Management, LLC, 175 AD3d 1144 (2019), a flood of frequency-of-pay class action litigation targeted New York State employers that paid alleged manual workers on a bi-weekly instead of weekly basis. Prior to Vega, employees could not bring a civil action for frequency-of-pay violations, and compliance with frequency-of-pay requirements for manual workers was enforced by the state Department of Labor. The Vega decision broke with longstanding precedent in holding that employees were allowed to sue their employers in a private cause of action for alleged violations of the NYLL’s frequency-of-pay provisions. The Vega court reasoned that the private right of action exists by finding a bi-weekly pay schedule (as opposed to a weekly pay schedule) constituted an “underpayment” of wages, even if the wages would be paid in full the following week.²

The surge of frequency-of-pay class action litigation that grew out of the Vega decision, coupled with New York’s six-year statute of limitations for unpaid wages, and the availability of liquidated damages in federal court, have been extremely costly for New York employers. In these actions, employees frequently seek liquidated damages equal to 50% of total wages for the entire six-year statutory period for an employer’s technical infraction of the NYLL (as opposed to interest for the lost time value of the late payment). 

In 2024, the New York State Appellate Division, Second Department issued a decision that rejected the holding in Vega. In Grant v. Global Aircraft Dispatch, 223 AD3d 712 (2014), the Second Department held that no private right of action exists that allowed employees to recover liquidated damages for allegedly late paid wages. Despite being helpful to employers, however, the Grant decision did little to stem the tide of frequency-of-pay class actions.  

2025 New York Budget, ELFA Part U

In the absence of a judicial fix to the frequency-of-pay class actions, the legislative and executive branches of the New York State government responded to pleas from New York’s business community and took action. On April 29, 2025, New York Governor Hochul reached an agreement with the New York State Legislature to adopt a $254 billion dollar budget for FY2026. Part U of the Education, Labor and Family Assistance (ELFA) includes an amendment to Section 198 of the Labor Law that limits damages (as described below) from pending and future actions for frequency-of-pay violations. The approach is consistent with recent years’ practice of making significant policy changes, both fiscal and non-fiscal, as part of the state budget. 

The bill amends Section 198(1-a) of the NYLL to narrow the scope of available damages for alleged manual workers’ frequency-of-pay claims. The amendment provides “liquidated damages shall not be applicable to violations of paragraph a of subdivision one of section one hundred and ninety-one of this article where the employer paid the employee wages on a regular payday, no less frequency than semi-monthly.” In such situations, the amended Section 198(1-a)(i-ii) provides that violations of Section 191(1)(a) are limited to “lost interest found to be due for the delayed payment of wages calculated at the daily interest rate for each day payment is late” at the rate of interest set by the Department of Financial Services under Article 14-a of the Banking Law (which is currently set at 16% per year). 

As an example, currently, an employer paying a “manual worker” employee $4,000 bi-weekly – instead of $2,000 weekly – could be found liable for liquidated damages of the full $2,000 amount earned by the “manual worker” employee during the first week of the pay cycle. However, with the amendment (and assuming wages were paid to the employee within 7 days of the close of the second week of the pay cycle), the potential recovery for the late payment would be capped at approximately $6.14 by calculating the amount of interest that accrued on the $2,000 allegedly late payment over a 7-day period.

For conduct occurring after the effective date of the amended Section 198(1-a), liquidated damages may be sought in an amount equal to the “wages found to be due” in violation of Section 191(1)(a) “for any employer who, after the effective date of this paragraph, has been subject to one or more previous findings and orders for violations” of Section 191(1)(a).³ For employers found in violation of Section 191(1)(a) after the effective date of this amendment, the consequences for failing to pay manual workers weekly continues to be severe. 

Key Takeaways

Employers with no history of prior violations will have a measure of relief from the potentially devastating damages since the Vega decision under the amendment. However, employers with prior violations must be particularly cautious, as the amendment preserves the availability of 100% liquidated damages based upon late paid wages. Employers involved in pending lawsuits may see a shift in liability and damages calculations, which should help stem the tide of class actions. Businesses should review their payroll practices to ensure compliance with the amended law, and businesses with one or more prior violations should take proactive steps to mitigate the risk of enhanced penalties. Businesses involved in pending actions should consult with their legal counsel to evaluate the amendment's impact on ongoing litigation.  

This amendment is scheduled to take effect immediately upon Governor Hochul’s signature. Under its terms, the bill is expected to impact both pending and future actions, as the provisions “shall apply to causes of action pending or commenced on or after such date.” 

This amendment reflects a balanced approach to addressing employer concerns while maintaining worker protections under the NYLL. By limiting damages for minor infractions, focusing enforcement on egregious violations, and applying the revised framework to pending actions, the amendment provides clarity and predictability for employers.