Opinion ID: 764886
Heading Depth: 2
Heading Rank: 2

Heading: Liquidated Damages Under New York Law

Text: 31 Under New York's Labor Law, when an employer willfully refuses to pay an employee, the court shall allow such employee . . . an additional amount as liquidated damages equal to twenty-five percent of the total amount of the wages found to be due. N.Y. Labor Law § 198(1-a) (McKinney 1986). The Labor Law defines wages as the earnings of an employee for labor or services rendered, regardless of whether the amount of earnings is determined on a time, piece, commission or other basis. Id. § 190(1). 32 Despite this sweeping definition, NatWest maintains that Judge Conti erred in awarding liquidated damages under the Labor Law because incentives like Reilly's Percentage Bonus are not wages. NatWest relies heavily on dicta from Dean Witter Reynolds, Inc. v. Ross, 429 N.Y.S.2d 653, 658 (1st Dep't 1980), that [t]he term 'wages,' . . . does not encompass an incentive compensation plan. 33 Dean Witter is unhelpful to NatWest. In that case, the employee stockbroker's contract provided that he would receive incentive pay based on the profits he generated, minus certain deductions for his administrative and trading expenses. See id. at 655. The Industrial Commissioner of the State of New York ordered the employer to stop taking those deductions from the employee's pay, and to reimburse the employee for the deductions already taken. The Department of Labor affirmed that order, concluding that the deductions represented withheld wages under the Labor Law. The Appellate Division reversed. The court stated: [w]e hold . . . that [the Labor Department] applied the definition of the term 'wages' prematurely because the 'incentive pay' did not become earned and the employee had no vested interest in the additional compensation until . . . all appropriate adjustments were made in conformity with the incentive . . . plan. Id. at 658. 34 Dean Witter stands for the unremarkable proposition that incentive pay does not constitute a wage until it is actually earned and vested. This is consistent with the holdings of subsequent New York cases. See Tuttle v. Geo. McQuesten Co., 642 N.Y.S.2d 356, 358 (3d Dep't 1996) (commissions based on percentage of sales were wages because they were earned and the employee had a vested right to [them] at the time of his resignation); Daley v. Related Cos., 581 N.Y.S.2d 758, 759, 762 (1st Dep't 1992) (compensation comprised of commissions based on [percentage of] real estate syndications were wages covered by the Labor Law). 35 Here, Reilly's pay was guaranteed under the Percentage Bonus formula to be a percentage of the revenue he generated, and was not left to NatWest's discretion. The jury found that NatWest owed Reilly $2.054 million under his contract, but that it willfully withheld $1.054 million from that amount. Unlike the employee in Dean Witter, Reilly was clearly entitled to that $1.054 million as earned and vested compensation. See Weiner v. Diebold Group, Inc., 568 N.Y.S.2d 959, 961 (1st Dep't 1991). As such, Reilly's Percentage Bonus falls comfortably within the definition of a commission that is expressly included within the Labor Law's definition of wages. N.Y. Labor Law § 190(1); see Caruso v. Allnet Communications Servs., Inc., 662 N.Y.S.2d 468, 469 (1st Dep't 1997) ('commission' . . . is generally viewed as earned non-forfeitable compensation) (citing Tuttle, 642 N.Y.S.2d at 358).