Luxury brands operating globally are adept at adjusting their practices to local laws and culture. Although nearly all luxury retailers are familiar with the New York City market, they may have missed a developing trend: a significant increase in pay frequency litigation over the past few years.   

Paying workers in New York

As background, Section 191 of the New York Labor Law (NYLL) requires workers to be paid weekly if they are “manual” workers, and at least semi-monthly if they are “clerical and other workers”. Commissioned salespeople may be paid monthly, but no later than the last day of the month following the month in which wages and commissions are earned. Employees who work in a bona fide executive, professional or administrative capacity and earn over $1,300 per week are exempt from Section 191.  

In 2019, New York’s Appellate Division First Department, in a case called Vega v. CM & Associates Construction Management, found that employees have a private right of action to bring lawsuits if they were paid less frequently than Section 191 requires for manual work. Since Vega, numerous lawsuits have been filed, often brought as putative class actions, alleging that employees were manual workers and thus should have been paid weekly instead of biweekly. Retailers including Bluemercury, Zara, Sephora, Levi Strauss & Co., Urban Outfitters and Nike, have been sued for failing to pay their sales employees weekly. Although Vega involved construction workers who were manual labourers, retail workers have asserted that they too are manual workers and should be paid every week.   

In nearly all post-Vega pay frequency cases, the workers acknowledge that they received their full wages biweekly but argue that if paid more frequently, they would have been able to earn additional interest on their investments or more easily afford necessities. Given NYLL’s six-year statute of limitations, plaintiffs in pay frequency litigation often seek high-dollar damages and attorneys’ fees, stemming from years of receiving biweekly paychecks. In other words, while the damages for a single plaintiff are relatively low, the liability could be much greater for multiple plaintiffs over a longer period, especially when factoring in potential plaintiffs’ attorneys’ fees.  

Who is a “manual” worker?

At the heart of these cases is a debate over who is considered a manual worker. NYLL defines a manual worker as a ‘mechanic, workingman or labourer’, which the New York State Department of Labor interprets to include any worker who spends more than 25% of his or her time performing ‘physical labour’.  

In several pending cases, retail workers at stores contend that more than a quarter of their time is spent on tasks such as handling inventory, stocking shelves, operating cash registers, folding clothes and operating fitting rooms for customers. Because many of these cases are still in discovery or have settled, there are few decisions on whether these task types are sufficiently physical for a salesperson to be deemed a manual worker. Further, whether a particular worker spends more than 25% of his or her time on physical tasks is a fact-intensive and case-specific inquiry. 

In at least one case brought in New York state court, the court found that a bakery worker’s time at a cash register was clerical, not manual work. Many luxury retail salespeople spend much of their day at a register or point of sale system processing transactions, or in a back office performing clientele outreach. However, many salespeople inevitably handle other tasks that could be viewed as less clerical, such as retrieving a pair of shoes for a client or returning a handbag to a shelf after showing it to a customer. Further, many luxury retailers have operational employees, who might spend more time on physical tasks, such as transferring inventory to and from an off-site storage facility.  

Potential relief for employers 

In January 2024, the New York Appellate Division Second Department found in Grant v. Global Aircraft Dispatch that there is no private right of action under NYLL Section 191 when a worker is paid in full on a regular biweekly basis, even if the employee was a manual worker. The court noted that the statute does not contain an express right to sue one’s employer, as there are other statutory enforcement mechanisms, such as civil penalties, if an employee is not paid. 

Since Grant, courts in New York have wrestled with how to handle the contrasting decisions from the First and Second Departments. To make matters more confusing, state courts must follow the decision of the appellate courts in the department in which the court is located, so there is a clear disagreement within New York about how these matters should be adjudicated. Either decision does not bind federal courts; practitioners should analyse these claims as they believe the New York Court of Appeals, the state’s highest court, would opine if faced with the question. 

Since the Grant decision, federal courts have diverged in assessing how the Court of Appeals would decide this issue. For example, in February 2024, in Zachary v. BG Retail LLC, a federal court allowed the pay frequency claims of a shoe store worker to proceed, expressing a belief that the Court of Appeals would likely adopt the logic of Vega rather than Grant. In another case, Galante v. Watermark Servs., a federal court found that Grant was a “well-reasoned decision” and that the New York Court of Appeals would similarly find no implied private right of action under Section 191 of the NYLL.  

The good news? Several pending legislative proposals seek to limit damages or provide employers with additional defences to these claims. For employers with more than 1,000 employees in New York, there is also a process to apply to NYDOL for a variance to pay workers biweekly or semi-monthly. However many luxury brands, unfortunately, do not qualify for the exemption status. Indeed, as of 1 March this year, fewer than 200 employers statewide received a variance.  

Until the New York Court of Appeals weighs in on this issue or there is legislative action to prevent these claims, pay-frequency litigation in New York will continue to be in style. 

Keith A. Markel is a partner and co-chair of Morrison Cohen’s labour and employment department of Morrison Cohen. Based in New York City, he can be reached at [email protected].  

Alana R. Mildner Smolow is an associate in the firm’s labour and employment department, also based in New York City. She can be reached at [email protected].  

Morrison Cohen’s labor and employment team counsels luxury brands in all aspects of labour and employment law and represents them in formal proceedings before administrative agencies and courts throughout the US.