Skip to Page Content

The Hidden Costs of a Bi-Weekly Payroll

    The Hidden Costs of a Bi-Weekly Payroll

    By: Sara Kula, Esq.

    There are many benefits to paying employees bi-weekly (or semi-monthly) rather than weekly. For instance, paying bi-weekly may reduce the time and cost a business spends on payroll processing. However, paying some employees in New York bi-weekly, rather than weekly, may constitute a legal violation that results in significant risk and potential liability for an employer.

    The New York Labor Law provides that a “manual worker shall be paid weekly and not later than seven calendar days after the end of the week in which the wages are earned.” NY Lab. Law § 191.1.a. The Labor Law defines a “manual worker” as a “mechanic, workingman or laborer.” NY Lab. Law § 190.4.  The New York State Department of Labor (“NYSDOL”) has interpreted this vague definition to include any employee who spends more than twenty-five percent of their working time performing physical labor. “Physical labor,” according to the NYSDOL “include[s] a wide range of physical activities.” The determination of whether any employee is a manual laborer requires an analysis of the employee’s duties and tasks performed and the approximate amount of time spent on each task or duty. However, the NYSDOL has opined that employees such as hairdressers, cooks and waitstaff may be considered manual workers entitled to weekly pay.

    The New York Labor Law also provides that an employee who prevails on a claim relating to an underpayment of wages is entitled to an additional amount as liquidated damages equal to 100% of the total amount of the underpayment. NY Lab. Law § 198.1-a. In a recent appellate court decision, Vega v. CM & Associates Construction Management, LLC, the First Department held that the term “underpayment” can encompass late payments because “underpay” is defined as “to pay less than what is normal or required” and failing to pay wages in compliance with the Labor Law is less than what is required. The court further held that a manual worker who was paid bi-weekly could pursue a private right of action seeking liquidated damages for each late payment of wages.

    This decision, if upheld on appeal, may have dire consequences for employers. It permits  a manual worker who received all of the wages that he was entitled to on a biweekly payroll to sue his employer for 100% liquidated damages for each late paycheck. Presuming the employee was paid "late" every other week, he could be entitled to damages equal to 50% of his total compensation for the six-year statute of limitations period.

    Employers should take steps now to mitigate any potential exposure. Employers who currently pay on a weekly basis should confirm that their paychecks are provided within seven calendar days of the end of the workweek. Employers that do not currently utilize a weekly payroll should determine if any of their workers might qualify as a “manual worker” under the law to whom weekly pay is required, and make any necessary adjustments. Large employers, employing an average of 1,000 or more employees in New York, may apply for an exception to the weekly-payment requirement. With respect to all employees, employers should ensure that their payroll system provides for timely payment in accordance with the Labor Law’s requirements.