The New York State Senate is poised to pass an employee-friendly bill that would amend New York’s lien law to enable employees to, upon filing a wage claim, obtain a temporary lien against their employer’s (or alleged employer’s) assets. A substantially similar bill was passed by the New York State Assembly and Senate in 2019 (S2844B) but vetoed by then-Governor Cuomo in early 2020.
Restaurants that suffered economic losses during the COVID-19 pandemic may get hit hard by provisions in a new wage theft bill under consideration. Assembly Bill A766, referred to as the Securing Wages Earned Against Theft (SWEAT) bill, would empower workers to obtain an “employee’s lien” against an “employer” upon asserting a “wage claim.” The term “wage claim” is broadly defined as: …a claim that an employee has suffered a violation of sections one hundred seventy, one hundred ninety-three, one hundred ninety-six, six hundred fifty-two or six hundred seventy-three of the [New York Labor Law] or the related regulations and wage orders promulgated by the commissioner, a claim for wages due to an employee pursuant to an employment contract that were unpaid in violation of the contract, or a claim that an employee has suffered a violation of 29 U.S.C. § 206 or 207.
The New York City Hospitality Alliance has led the battle that has found its way back on its member plates for a second time. In June 2021, The SWEAT Coalition, in an open letter to the Alliance on June 1, claimed the organization seemed more interested in protecting the bottom line of businesses rather than employees in standing against A.766. The bill was sponsored by Manhattan Assemblywoman Linda Rosenthal with a goal of stopping unscrupulous employers from depriving their workers of a proper wage.
Known as the SWEAT Bill (Securing Wages Earned Against Theft), the legislation would enable employees wrongfully deprived of their pay to file liens against their current or former employer — much like any other business creditor would. Liens would essentially freeze the business’ assets and/or limit their borrowing power until the debt of the lien holder is satisfied.
The New York State Restaurant Association also finds itself embroiled in the battle as the current legislation’s provisions could financially paralyze businesses and even their managers over the most basic claims of wage theft. “What this is really all about is paralyzing the finances of a restaurant,” explained NYSRA’s Kevin Duggan at last month’s HUB/TFS Quarterly Industry Seminar. “Passage of this bill would create potential liability for a restaurant’s investors and freeze banks’ lines of credits.”
More workers across New York have reported instances of wage theft in recent years, the SWEAT Coalition noted, stressing the necessity for the legislation. State lawmakers passed the bill during the 2020 session in Albany, but Governor Andrew Cuomo vetoed it when it arrived at his desk.
Giving workers the power to issue a lien against their employer, the coalition argued, would help level the playing field and discourage businesses from depriving their employees of their proper earnings.
In its open letter to the New York City Hospitality Alliance, the coalition suggested that the group was doing a disservice to workers in the restaurant and hospitality industry — and protecting unscrupulous business owners — in standing against the
“By currying sympathy for unscrupulous employers who ruthlessly and insistently exploit the weaknesses of the current law to make more profit off the backs of their workers, you hurt your own base of employers who aim to do the right thing,” the SWEAT Coalition wrote. “Moreover, during this pandemic, when workers, their families and many businesses are struggling, it is unconscionable that scofflaw employers use the pandemic to justify cheating their workers of their pay.”
The NYC Hospitality Alliance, however, believes the SWEAT bill contains severe flaws that would do more harm to businesses than good for the employees the legislation seeks to protect. The organization claims the legislation, as it is currently written, would enable disgruntled employees to file liens based on mere allegations rather than proven wrongdoing.
The alliance further claims the bill would shift the balance of power in negotiations from employers to employees over threats of wage claims and liens; drive up bankruptcy rates by businesses seeking to relieve themselves of the liens; and even put first-line managers at risk of being classified as “employers” and further subject to liens.
“Since the onset of the pandemic, our organization has advocated 24/7 to support the survival and recovery of New York’s restaurants, bars, clubs and workers. It’s unfortunate this coalition is trying to use the press, wage theft and COVID-19 to misrepresent the legitimate legal concerns that struggling small businesses have with this legislation, rather than addressing those issues openly in good faith, as we’ve done on behalf of the industry,” said Andrew Rigie, executive director of the New York City Hospitality Alliance.
Employers raised numerous concerns, including potential constitutional concerns, when the SWEAT bill’s prior incarnation, S2844B, was passed by the New York State Assembly and Senate in 2019. “As acknowledged by Governor Cuomo when he vetoed the SWEAT bill in 2020, revoking due process raises significant legal issues, and until those critical considerations are updated, the legislation remains unviable,” Rigie added
The issues raised by employers in 2019 are not addressed in the current SWEAT bill, which remains nearly identical to S2844B. Thus, presumably the same legal challenges and issues cited by employers and other interested groups regarding S2844B exist with respect to the SWEAT bill, and legal challenges may follow should Governor Hocul sign the SWEAT bill into law without amendment. Governor Hocul has not yet expressed an opinion on the SWEAT bill.