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1 www.sewkis.com Court Holds an ADEA Waiver Is Unenforceable n Summary: Employers should take note of a recent decision by the United States District Court for the District of Colorado, Foster v. Mountain Coal Co., L.L.C., 2014 U.S. Dist. LEXIS 67637 (D. Colo. May 16, 2014), which held that a release contained in a separation agreement did not contain sufficient disclosures to release claims under the Age Discrimination in Employment Act of 1967 (the “ADEA”). Specifically, the Court held that the release failed to strictly comply with the notice requirements under the Older Workers’ Benefit Protection Act of 1990 (“OWBPA”), which requires the employer to advise an employee to consult with an attorney prior to executing it. Because the release did not expressly advise the employee to consult with counsel, the Court denied summary judgment and the former employee was allowed to proceed with his ADEA claim even though he had signed the release and received a severance payment. Full article on page 2. Arbitration of Whistleblower Retaliation Claims: Alive and Well After Dodd-Frank? n Summary: Following the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act in July 2010, predispute arbitration clauses appeared all but dead in retaliation cases brought by employees who have blown the whistle on alleged shareholder fraud or securities laws violations. e issue has yet to be addressed by a federal appeals court, but recently several district courts have breathed life back into an employer’s ability to compel arbitration of these claims. Full article on page 3. New York Wage eft Protection Act Amendments Set To Become Law n Summary: On July 19, 2014, the New York State Legislature passed a bill amending New York’s Wage eft Prevention Act (the “WTPA”). As reported in our Summer 2011 Newsletter, the WTPA, which became effective on April 2011, required employers to provide employees with a notice of their wage rate at the time of hire and annually, provide proper pay statements, and imposed penalties for non-compliance. e 2014 amendments ease some of the administrative burden on employers and enhance penalties for non-compliance. e bill will become effective sixty days after it is signed into law by Governor Cuomo. Full article on page 5.

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Page 1: Court Holds an ADEA Waiver Is Unenforceable · in Employment Act of 1967 (the “ADEA”). Specifically, the Court held that the release failed to strictly comply with the notice

1 www.sewkis.com

Court Holds an ADEA Waiver Is Unenforceable n Summary: Employers should take note of a recent decision by the United States District Court for the District of Colorado, Foster v. Mountain Coal Co., L.L.C., 2014 U.S. Dist. LEXIS 67637 (D. Colo. May 16, 2014), which held that a release contained in a separation agreement did not contain sufficient disclosures to release claims under the Age Discrimination in Employment Act of 1967 (the “ADEA”). Specifically, the Court held that the release failed to strictly comply with the notice requirements under the Older Workers’ Benefit Protection Act of 1990 (“OWBPA”), which requires the employer to advise an employee to consult with an attorney prior to executing it. Because the release did not expressly advise the employee to consult with counsel, the Court denied summary judgment and the former employee was allowed to proceed with his ADEA claim even though he had signed the release and received a severance payment.

Full article on page 2.

Arbitration of Whistleblower Retaliation Claims: Alive and Well After Dodd-Frank? n Summary: Following the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act in July 2010, predispute arbitration clauses appeared all but dead in retaliation cases brought by employees who have blown the whistle on alleged shareholder fraud or securities laws violations. The issue has yet to be addressed by a federal appeals court, but recently several district courts have breathed life back into an employer’s ability to compel arbitration of these claims.

Full article on page 3.

New York Wage Theft Protection Act Amendments Set To Become Law n Summary: On July 19, 2014, the New York State Legislature passed a bill amending New York’s Wage Theft Prevention Act (the “WTPA”). As reported in our Summer 2011 Newsletter, the WTPA, which became effective on April 2011, required employers to provide employees with a notice of their wage rate at the time of hire and annually, provide proper pay statements, and imposed penalties for non-compliance. The 2014 amendments ease some of the administrative burden on employers and enhance penalties for non-compliance. The bill will become effective sixty days after it is signed into law by Governor Cuomo.

Full article on page 5.

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In Foster v. Mountain Coal Co., L.L.C., 2014 U.S. Dist. LEXIS 67637 (D. Colo. May 16, 2014), the Court held that a release contained in a separation agreement did not contain sufficient

disclosures to release claims under the Age Discrimination in Employment Act of 1967 (the “ADEA”) because it did not advise the employee to consult with an attorney prior to executing the release as required under the Older Workers’ Benefit Protection Act of 1990 (“OWBPA”). As a result, summary judgment was denied and the former employee was allowed to proceed with an ADEA claim even though he had signed the release and received a severance payment.

In Foster, the plaintiff worked in construction and mining and had a limited educational background. Before the termination of his employment, he worked as a miner for one of the defendants. In June 2009, the plaintiff’s employment was terminated as part of a reduction-in-force at the mine that included approximately sixty (60) other terminations.

The Court Requires Strict Compliance with the OWBPA’s Requirement To Advise Employees to Consult With Counsel

The plaintiff was presented with a Severance Agreement and Release (the “Agreement”) in which he was required to release all claims, including claims under the ADEA, in exchange for an $8,800 severance payment. The OWBPA requires an ADEA waiver to be knowing and voluntary which, “at a minimum,” means it complies with the following requirements set out in 29 U.S.C. § 626(f )(1):(A) the waiver is part of an agreement between the individual and the employer that is written in a manner calculated to be understood by such individual, or by the average individual eligible to participate;(B) the waiver specifically refers to rights or claims arising under this chapter;(C) the individual does not waive rights or claims that may arise after the date the waiver is executed;(D) the individual waives rights or claims only in exchange for consideration in addition to anything of value to which the individual is already entitled;(E) the individual is advised in writing to consult with an attorney prior to executing the agreement;(F) (i) the individual is given a period of at least 21 days within which to consider the agreement; or (ii) if a waiver is requested in connection with an exit incentive or other employment termination program offered to a group or class of employees, the individual is given a period of at least 45 days within which to consider the agreement;

(G) the agreement provides that for a period of at least 7 days following the execution of such agreement, the individual may revoke the agreement, and the agreement shall not become effective or enforceable until the revocation period has expired;(H) if a waiver is requested in connection with an exit incentive or other employment termination program offered to a group or class of employees, the employer (at the commencement of the period specified in subparagraph (F)) informs the individual in writing in a manner calculated to be understood by the average individual eligible to participate, as to -- (i) any class, unit, or group of individuals covered by such program, any eligibility factors for such program, and any time limits applicable to such program; and (ii) the job titles and ages of all individuals eligible or selected for the program, and the ages of all individuals in the same job classification or organizational unit who are not eligible or selected for the program.29 U.S.C. § 626(f )(1).

The plaintiff argued that the Agreement did not comply with § 626(f )(1)(E), which requires the employee to be “advised in writing to consult with an attorney prior to executing the agreement.” The defendants contended the Agreement complied with the OWBPA because it provided that (1) the plaintiff, “by signing it, was acknowledging that he had had the ‘opportunity for consideration and consultation with [his] attorney’” and (2) that the plaintiff was advised that he could discuss the Agreement with his attorney “‘on a confidential basis to the extent necessary to interpret the Agreement.’” Foster, 2014 U.S. Dist. LEXIS, at *176.

Relying the U.S. Supreme Court’s holding in Oubre v. Energy Operations, Inc. that the OWBPA imposes “strict, unqualified” statutory requirements upon employers that wish to enforce an employee’s waiver of ADEA claims (see 522 U.S. 422, 427 (1998)), the Court held that because the Agreement did not expressly “advise [plaintiff] to consult with an attorney before signing it,” the Agreement did not comply with the OWBPA. Foster, 2014 U.S. Dist. LEXIS, at *20. The Court held that the release needed to affirmatively advise the plaintiff to consult with an attorney and that the passive language in the past tense did not comply with the statutory requirements. It made no difference to the Court that there was evidence that the plaintiff had, in fact, consulted with a workers’ compensation attorney.

The Court Addresses Whether Eligibility Factors for the Termination Program Were Accurately Described

The Court also considered whether the employer had complied

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with the other statutory requirements in §  626(f )(1)(H), including whether the plaintiff had been given adequate information about the termination program. Notably, the Court held that the eligibility factors for the termination program were accurately described in the Agreement based on the EEOC’s sample disclosure form, which provides: “All persons in the Construction Division are eligible for the program. All persons in our November RIF are selected for the program.” 29 C.F.R. § 1625.22(f )(4)(vii)(B); see also Rupert v. PPG Industries, Inc., 2009 U.S. Dist. LEXIS 125743 (W. D. Pa. Feb. 11, 2009) (holding that “eligibility” factors mean eligibility to be included in termination program). In so holding, the Court rejected the interpretation by other courts that the “eligibility” factors identified in § 626(f )(1)(H)(i) mean factors considered in deciding whether to terminate the employee’s employment.

See, e.g., Pagliolo v. Guidant Corp., 483 F. Supp. 2d 847, 861 (D. Minn. 2007); see also Kruchowski v. Weyerhaeuser Co., 423 F.3d 1139, 1143-44 (10th Cir. 2005).

What This Means for Employers

The Foster decision is an important case in the jurisprudence relating to the enforceability of ADEA waivers. It is a reminder that ADEA waivers will be examined closely if challenged. Employers should make certain that their ADEA waivers are strictly compliant so they do not find themselves in the same unfortunate position as the defendants in Foster: having paid severance that the employee is not required to tender back, yet still exposed to the cost, uncertainty and distraction of defending a claim of age discrimination. u

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Recent case law addresses an employer’s right to compel arbitration of certain whistleblower claims in the wake of the Dodd-Frank Wall Street Reform and Consumer

Protection Act of 2010 (“Dodd-Frank”). In January 2014, a federal district court in New York held that the prohibition on predispute arbitration clauses in Dodd-Frank applied only to the anti-retaliation provisions of the Sarbanes-Oxley Act of 2002 (“SOX”), as amended by Dodd-Frank, but not to Dodd-Frank’s newly enacted, and independent, anti-retaliation provisions (the “Dodd-Frank Anti-Retaliation Provisions”). More recently, a New Jersey federal district court rejected the view of certain other district courts, including the Southern District of New York, and held that Dodd-Frank’s prohibition on predispute arbitration agreements did not apply retroactively and thus, agreements to arbitrate entered into prior to the enactment of Dodd-Frank were enforceable.

Retaliation Claims under SOX and Dodd-Frank

Under the anti-retaliation provisions of SOX, publicly-traded companies and their subsidiaries are prohibited from taking any adverse employment action against an employee, officer, agent, contractor or subcontractor because he or she engaged in “protected activity,” which includes, among other things, reporting conduct the individual reasonably believed violates certain federal securities laws. See 18 U.S.C. §  1514A(a). Individuals asserting retaliation claims under SOX must first exhaust their administrative remedies, and their damages are generally limited to reinstatement, back pay with interest, and special damages, including litigation costs and attorneys’ fees. See id. § 1514A(b) and (c).

In 2010, Congress enacted Dodd-Frank, which, among other things, amended the anti-retaliation provisions of SOX. As relevant here, Dodd-Frank prohibited predispute arbitration agreements that would otherwise require arbitration of retaliation claims arising under SOX. See § 922(b) (amending 18 U.S.C. §  1514A). Dodd-Frank also added the Dodd-Frank Anti-Retaliation Provisions by amending the Securities Exchange Act of 1934 (the “1934 Act”) and creating a new statutory regime for alleged whistleblowers independent from SOX. See id. § 922(a) (adding a new Section 21F to the 1934 Act).

The Dodd-Frank Anti-Retaliation Provisions are, in almost all respects, broader than those under SOX. First, the Dodd-Frank Anti-Retaliation Provisions apply to public and private companies alike, and can even cover conduct occurring abroad if it has a “foreseeable substantial effect” within the United States. See § 929P. The Dodd-Frank Anti-Retaliation Provisions also have a considerably longer statute of limitations than their SOX counterpart. See Section 21F(h)(1)(B)(iii). Alleged whistleblowers may proceed in federal district court without first having to exhaust any administrative remedies, and, if successful, may recover double back pay, with interest, in addition to the other remedies available under SOX such as reinstatement, litigation costs and attorneys’ fees. See Section 21F(h)(1)(B)(i) and (C). Significantly, the Dodd-Frank Anti-Retaliation Provisions also provide for the payment by the Securities and Exchange Commission (the “SEC”) of a bounty to whistleblowers who meet certain statutory requirements, provided the SEC brings a successful enforcement action and recovers more than $1 million in monetary sanctions. See Section 21F(b).

In fact, the only way in which Dodd-Frank appears more limited

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than SOX is that it arguably applies only to individuals who report alleged violations of securities laws directly to the SEC, rather than those who report internally. See Section 21F(a)(6) (defining “whistleblower” as an individual who provides information to the SEC). Nevertheless, and as we have noted in prior newsletters, the majority of courts have held that internal reporting is also covered, relying primarily on rules promulgated by the SEC after the enactment of Dodd-Frank.

New York Federal Court Holds That Dodd-Frank Retaliation Claims Are Arbitrable

Earlier this year, the United States District Court for the Southern District of New York held that Dodd-Frank’s ban on predispute arbitration agreements applied only to claims arising under SOX’s anti-retaliation provisions and ordered the parties to arbitrate plaintiff’s Dodd-Frank retaliation claim. See Murray v. UBS Secs., LLC, 2014 U.S. Dist. LEXIS 9696, at *23-24 (S.D.N.Y. Jan. 27, 2014).

The plaintiff, Trevor Murray, was a former employee of defendant UBS Securities LLC who claimed he was terminated after he refused to “skew his published research in ways designed to support UBS Securities’ ongoing [commercial mortgage-backed securities] trading and loan origination activities,” and “repeatedly told his superiors at UBS Securities” about other employees’ insistence that he do so. Id. at *6-7. Murray simultaneously filed both a complaint in federal court asserting a retaliation claim under Dodd-Frank, and a complaint with the United States Department of Labor asserting a retaliation claim under SOX. In the federal complaint, Plaintiff based the Dodd-Frank retaliation claim on alleged “disclosures that are required or protected under [SOX],” which constitute protected activity under Dodd-Frank’s anti-retaliation provisions. See Section 21F(h)(1)(A)(iii). The plaintiff also noted that he intended to amend his pleading to add the SOX claim once he exhausted his administrative remedies before the Department of Labor.

Murray’s employment agreement as well as his Form U4 Uniform Application for Securities Industry Registration or Transfer required him to arbitrate any disputes with his employer, although his employment agreement provided a specific carve-out for claims arising under SOX. Relying on both the carve-out in his employment agreement, as well as a recent Financial Industry Regulatory Authority (“FINRA”) rule that expressly excludes from mandatory arbitration “a dispute arising under a whistleblower statute that prohibits the use of predispute arbitration agreements,” see FINRA Rule 13201(b), the plaintiff argued that he was not required to arbitrate even his Dodd-Frank retaliation claim. The Court did not agree.

First, the Court held that the plaintiff’s claim arose under the

Dodd-Frank Anti-Retaliation Provisions, rather than SOX, regardless of the fact that the plaintiff’s alleged “protected activity” included disclosures that were required under SOX. The Court noted that the anti-retaliation provisions of Dodd-Frank and SOX are “separate pieces of federal legislation, each of which provides a party with distinct rights and responsibilities.” Murray, 2014 U.S. Dist. LEXIS 9696, at *24. Notably, although Dodd-Frank amended SOX to include an express ban on predispute arbitration clauses, “an analogous prohibition” is not found in the newly enacted and independent Dodd-Frank Anti-Retaliation Provisions. Id.

Second, the Court concluded that the plaintiff’s claim was not within the exception in his employment agreement. On its face, the plaintiff’s employment agreement carved out only those claims “arising under” SOX, and plaintiff’s federal complaint asserted only a claim arising under the Dodd-Frank Anti-Retaliation Provisions. Id. at *28.

Finally, the Court held that the arbitrator must determine whether the plaintiff’s claim was within the scope of the arbitration agreements, although it strongly suggested that it was. The Court first noted that FINRA’s recently amended Rule 13201(b) excludes from arbitration only those disputes “arising under a whistleblower statute that prohibits the use of predispute arbitration agreements,” i.e., SOX whistleblower claims. Id. at *36. From this, the Court alluded to the fact that its “holding that a cause of action under [Dodd-Frank’s anti-retaliation provisions] is not excluded from arbitration may have the effect of resolving the issue of the arbitrability of Plaintiff’s claim.” Id. Nevertheless, the Court ultimately “le[ft] it to the arbitrator to decide whether Plaintiff’s claim falls within the scope of the parties’ agreements to arbitrate.” Id. at *42.

New Jersey Federal Court Holds That Dodd-Frank’s Prohibition on Predispute Arbitration Agreements Does Not Apply Retroactively

After Murray was decided, the United States District for the District of New Jersey held that Dodd-Frank’s prohibition on predispute arbitration agreements did not apply retroactively and thus, parties who entered into an agreement to arbitrate prior to the enactment of Dodd-Frank could be forced to arbitrate retaliation claims. See Khazin v. T. D. Ameritrade Holding Corp., 2014 U.S. Dist. LEXIS 31142, at *22 (D.N.J. Mar. 11, 2014). This holding stands in tension with a prior holding of the Southern District of New York, but the Khazin Court was persuaded by those courts which held that Dodd-Frank’s prohibition on predispute arbitration agreements did not apply retroactively, and compelled arbitration. Id.

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The plaintiff, Boris Khazin, was a former employee of T.D. Ameritrade, who was terminated after he questioned the pricing of certain financial products and reported the issue to his supervisor. Id. at *2. Following his termination, the plaintiff filed a federal action alleging a violation of the Dodd-Frank Anti-Retaliation Provisions. Defendants moved to dismiss, arguing (i) that plaintiff was not a “whistleblower,” because he failed to report the alleged securities law violation to the SEC (id. *9-10), and (ii) that the plaintiff’s claims must be arbitrated pursuant to his written employment agreement dated October 25, 2006 which provided for “mandatory arbitration of any and all disputes.” Id. at *17.

As to the first issue, the Court held, as the majority of district courts to date have held, that Dodd-Frank protects individuals who report internally. Id. at *16. In addressing the second issue, the Court first noted defendants’ argument that Dodd-Frank’s ban on predispute arbitration agreements applies only to SOX claims, but nevertheless decided the motion based on its conclusion that Dodd-Frank did not apply retroactively. Id. at *18-22.

In determining whether the statute had retroactive effect, the Court first considered “‘whether Congress has expressly prescribed the statute’s proper reach,’” and if the statute is silent, “‘whether it would impair rights a party possessed when he acted, increase a party’s liability for past conduct, or impose new duties with respect to transactions already completed.’” Id. at *19 (quoting Landgraf v. USI Film Product, 511 U.S. 244, 280 (1994)). The Court noted that both the District of Massachusetts and Southern District of New York found that Dodd-Frank should be applied retroactively as to do so “would not produce prejudicial consequences” or “result in any disfavored consequence.” Id. at *20 (citing Pezza v. Invs. Capital Corp., 767 F. Supp. 2d 225, 234 (D. Mass. 2011) and Wong v. CKX, Inc., 890 F. Supp. 2d 411, 422 (S.D.N.Y. 2012)). Nevertheless, the Court was ultimately persuaded by the reasoning of federal district courts in Nevada, Colorado, South Carolina, and the District of Columbia, all of which held that to apply the statute retroactively would “fundamentally interfere with the parties’ contractual rights and . . . impair the ‘predictability and stability’ of their earlier agreement.” Id. at *21. Indeed, “the parties

executed a valid arbitration agreement in 2006,” and their “expectations were to arbitrate any issues arising from Plaintiff’s employment.” Id. at *22. For these reasons, the Court held that Dodd-Frank did not apply retroactively and ordered the parties to arbitration.

The Implications of Murray and Khazin

In the aftermath of Murray and Khazin, it appears that some whistleblower claims will be arbitrable post Dodd-Frank, but this may vary by jurisdiction on the issue of retroactive application. First, as both the statutory language of Dodd-Frank and Murray make clear, Dodd-Frank’s ban on predispute arbitration agreements applies only to claims brought under SOX. And, given the fact that the Dodd-Frank Anti-Retaliation Provisions provide far broader protections than those under SOX, plaintiffs may be more likely to bring a Dodd-Frank whistleblower claim rather than a SOX claim if the circumstances present them with a choice between the two.

Second, FINRA’s recently amended rules, which preclude arbitration of certain whistleblower claims, apply only to those disputes “arising under a whistleblower statute that prohibits the use of predispute arbitration agreements.” FINRA Rule 13201(b). Based on the Court’s conclusion in Murray, the Dodd-Frank Anti-Retaliation Provisions do not prohibit the use of predispute arbitration agreements, and therefore employees who have signed Form U4 can still be required to arbitrate Dodd-Frank whistleblower claims.

Finally, Khazin adds another decision to those issued by district courts rejecting retroactive application of Dodd-Frank, going against district courts in Massachusetts and New York. Although Khazin involved a claim arising under Dodd-Frank, the Court’s reasoning with regard to retroactivity applies with equal force to claims arising under SOX. And, at least two of the other federal courts on which Khazin was based involved exclusively SOX claims. See Blackwell v. Bank of Am. Corp., No. 11-2475, 2012 U.S. Dist. LEXIS 51447 (D.S.C. Apr. 12, 2012); Henderson v. Masco Framing Corp., No. 11-0088, 2011 U.S. Dist. LEXIS 80494 (D. Nev. July 22, 2011). Until a federal appeals court decides the issue, the split in the district courts will likely continue. u

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On July 19, 2014, the New York State Legislature passed a bill (the “Bill”) amending New York’s Wage Theft Prevention Act (the “WTPA”). The Bill, which will

become effective sixty days after it is signed into law by Governor

New York Wage Theft Protection Act Amendments Set to Become LawCuomo, expands the penalties for violations of the wage notice requirement and other wage violations, and enhances an aggrieved employee’s ability to enforce his or her rights. N.Y.A. 08106-C, 237th Sess. (2014). Importantly, the Bill also eases

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employers’ administrative burdens to comply with the WTPA’s reporting requirements. This article summarizes some notable aspects of the new law.

Reduced Administrative Burden on Employers

Under the current WTPA, employers must provide a notice to each new hire detailing, among other things, the newly hired employee’s rate of pay and how it is measured and paid (a “Wage Notice”). In addition, employers must provide an annual Wage Notice to each of their employees. N.Y. Lab. Law §195. The Bill eliminates the need to provide employees with an annual Wage Notice; however, employers will continue to be required to provide new hires with a Wage Notice at the time of hiring. N.Y.A. 08106-C §1, 237th Sess. (2014).

Increase in Penalties

While reducing the administrative burden on employers, the Bill increases the penalties employers face for (1) non-compliance with their wage reporting requirements and (2) being repeat offenders of the wage laws. N.Y.A. 08106-C §2, 237th Sess. (2014). • Penalties for failure to provide a Wage Notice to a newly hired employee within ten business days of their first day of employment have increased to $50 per day, from $50 per week, up to a maximum of $5,000, increased from $2,500, per violation;• Penalties for failure to provide employees with a statement accompanying each wage payment have increased, to $250 per day, from $100 per week, up to a maximum of $5,000, increased from $2,500, per violation;• Note that employers are afforded an affirmative defense for failing to provide Wage Notice or a pay statement to their employees. To assert the affirmative defense, an employer will have to show that: - it made a complete and timely payment of wages due; or - it reasonably, in good faith, believed it was not required to provide the information required to the employee. • When the New York State Department of Labor (“DOL”) issues an order finding wage violations against an employer who was previously found to have violated the wage payment laws, or whose violation is willful or egregious, the order will direct the employer to report wage and employee information to the DOL which will be available on the DOL’s website. N.Y.A. 08106-C §3, 237th Sess. (2014). • The maximum penalty that the Commissioner of Labor can impose on an employer who has a second violation of wage payment laws within six years is increased from $10,000 to $20,000. N.Y.A. 08106-C §6, 237th Sess. (2014).

• The amount of liquidated damages an employee may collect from an employer who retaliated against them for reporting a violation is also increased to a maximum of $20,000 from $10,000. N.Y.A. 08106-C §6, 237th Sess. (2014).

Personal Liability for LLC Members and Successor Liability

The Bill also amends §609 of the New York Limited Liability Company Law to impose personal liability for wage violations on the ten members with the largest percentage ownership interest of an LLC. N.Y.A. 08106-C §11, 237th Sess. (2014). Members are jointly and severally liable and, if a member pays more than their pro rata share, the member can collect a pro rata contribution from other members. In order to collect from LLC members, the LLC must first be found liable for unpaid wages and the employee must be unable to enforce the judgment against the LLC. Then, to collect from LLC members personally, employees must first notify the members that they intend to hold them liable following the process set forth in the amended Bill. This amendment tracks a similar provision in the New York Business Corporation Law which provides that the ten largest shareholders of a corporation are personally liable for unpaid wages. N.Y. B.C.L. §630.

In order to prevent entities that previously violated the New York Labor Law (the “Labor Law”) from restructuring and escaping liability, the Bill amends §§ 218 and 219 of the Labor Law to expressly create successor liability such that if a prior employer is found to be in violation of the Labor Law and a new employer is engaged in “substantially the same” work practices, the new employer is liable for the acts of the prior employer. N.Y.A. 08106-C §3, §4, 237th Sess. (2014).

Conclusion

While the reduced administrative burden to employers will be a welcome change, employers should ensure they are complying with their wage reporting and wage payment obligations under the Labor Law. Members of an LLC should also realize that they could be held personally liable for the LLC’s unpaid wages. Similarly, a new employer can be held liable for the actions of a previous employer when the two entities are engaged in “substantially the same” services. u