The state of New York has officially stepped in rewrite the rules of compensation and benefits through Bill 2236-A, the Wage Payment Integrity Act. Until now, an employer in New York could dangle a huge financial carrot in an employment offer and persuade high-performing talent to work for more than 70 hours a week. Under the new statutory architecture, any incentive pay, regardless of whether it depends on the company’s goals, overall profitability or even strategic outcomes, is presumed to be an earned wage that is fully protected under New York Labor Law.
Employers must review all offer letters, contracts, commission sheets and annual incentive plans to determine which programs are deemed to be non-discretionary versus fully discretionary.
Changes under the Wage Payment Integrity Act
The new legislation promises to upend the bygone framework that ensuring that all incentive compensation constitutes earned wages.
Compensation that was previously tied to targets, revenue or KPIs will now be protected wage once the agreed-upon conditions are met.
An employer can only avoid wage status if the bonus is discretionary. For this to happen, the employer must state in clear and concise written terms in advance that the bonus, timing and amount remain within the organization’s sole and absolute discretion.
Any contradiction between written policies and actual practice will defeat an employer’s claim of discretion.
This reclassification of incentive as wages completely overhauls the financial and legal risks of compensation disputes in the state of New York. Under the New York Labor Law, if an employer fails to pay wages on time, it can result in damages, statutory prejudgment interest and mandatory liability for the employee’s attorney fees.
How to stay compliant with Wage Payment Integrity Act
In order to mitigate the risks associated with the changes labor law, employers must ensure a few practical steps are taken well in advance.
Employers must review all offer letters, contracts, commission sheets and annual incentive plans to determine which programs are deemed to be non-discretionary versus fully discretionary.
In addition, employers must ensure that all explicit and prominent disclaimers are placed directly within the documents and acknowledged by both the parties.
As for non-discretionary programs, employers must fully verify that the calculated mechanics, payment timelines and forfeiture conditions are compliant with the New York Labor Law.
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