Prevailing Rate Alert!

On February 24, 2008, amendments to New York Labor Law Sec. 220 will take effect requiring contractors and subcontractors performing public works construction to provide written notification to field employees of the prevailing wage rate for their particular job classification. The notification must be given to each worker on their first day of work and with every subsequent pay stub.

In addition, the workers must also be provided with contact information for the New York State Department of Labor (the “NYSDOL”) at the beginning of each public job and at various times thereafter. The notification must contain a statement advising the worker that he/she has a right to contact the NYSDOL to report violations if they are not receiving proper prevailing wages and supplemental benefits for their particular job classification.

Violations of the statute can result in monetary civil penalties. Public works contractors should take note of the new law and adjust their employment practices accordingly.

Lawyer Joke Friday

This one's a bit longer than usual, but I like it a lot. Enjoy!

Two small boys of pre-school age were overheard talking one day. One said "My Daddy's an accountant." The other replied "My Daddy's a lawyer." "Honest?", asked the first boy, obviously impressed. No, just the regular kind, replied the lawyer's son.

Is An "Executive" An "Employee"?

That’s a good question. So good, in fact, that the United States Court of Appeals for the Second Circuit recently certified that question to the New York Court of Appeals for resolution in a case entitled: Pachter v. Bernard Hodes Group, Inc. To my mind, New York law broadly construes the term “employee” and fails to make any distinction between executives and non-executives for purposes of determining “employee” status. While some New York courts agree, others do not. Given the apparent sharp split between the judiciary, it’s now up to the State’s highest court to opine on the subject.

In Pachter, the Plaintiff was a Vice President of the Defendant, a recruitment, marketing and staffing services company; the Plaintiff worked on commission which was subject to various deductions by the Defendant. Those deductions included, but were not limited to finance charges if client payments were not received promptly, the payment of salary and benefits for Plaintiff’s assistant, bad debt, client refusals to pay their bills due to errors, and miscellaneous costs. After Plaintiff left the company, she sued for, inter alia, reimbursement of the deductions made from her commissions. The Plaintiff moved for summary judgment, arguing that the deductions were unlawful under New York Labor Law Sec. 193 because the statute permits an employer to deduct only limited types of items from employee wages such as health insurance premiums, pension benefits, union dues and similar payments for the employee’s benefit. The Defendant also moved for summary judgment on the grounds that the Plaintiff, as an "executive", was excluded from the statutory definition of "employee," and, even if she were not so excluded, the subject commissions were not “earned” under the Labor Law until after the deductions in question were made.

The lower court granted the Plaintiff’s Motion and denied the Defendant’s application. The Defendant appealed to the Second Circuit which certified two questions to the New York Court of Appeals: (i) whether an executive is an employee under Labor Law Sec. 193 and thus subject to the protections of the statute?; and (ii) when, in the absence of a governing written agreement, are commissions "earned" and therefore considered "wages" under Labor Law Secs. 191 and 193, thereby rendering most subsequent deductions unlawful?

As to the first certified question, I respectfully conclude, based on my reading of the statute and related provisions of the Labor Law, that an executive qualifies as an employee for purposes of Section 193 inasmuch as Labor Law Sec. 190(2) defines the term “employee” as “any person employed for hire by an employer in any employment.” That’s a pretty broad definition, n’est ce pas? Despite this apparent “slam dunk” (I know, there’s no such thing in law, life or love), the Second Circuit, seemingly troubled by the split of decisional authority, refused to pass on the issue and punted instead.

As to the second certified question, the Second Circuit, noting that no written agreement existed between the parties, opined that their relationship was akin to a conventional, common law brokerage relationship where the commission is earned upon bringing a client to the table, among other things. Since the New York courts provided absolutely no guidance on this issue, the Second Circuit chose to certify the question

IMHO, the Second Circuit was correct in the latter instance, but wrong as to the former. The issue concerning commissions is certainly one of first impression and was properly referred to the State’s highest court. However, the Second Circuit could have resolved the executive/employee issue by looking to the plain language of the statute. Indeed, in dicta, the court stated that its consideration of the relevant statutory authority suggested that the definition of an employee under Labor Law Sec. 190(2) was to be applied broadly, even to executives. So, what’s the problem? Why the need to waste time, expense and judicial resources on that score? Beats me. But, hey, that’s the system hard at work as it continues to spin tax dollars and logic in a never-ending circle of confusion.

Lawyer Joke Friday

Here are some thought provoking (and perhaps confusing) observations that I came across recently:

In the USA, everything that is not prohibited by law is permitted.

In Germany, everything that is not permitted by law is prohibited.
In Russia, everything is prohibited, even if permitted by law.
In France, everything is permitted, even if prohibited by law.
In Switzerland, everything that is not prohibited by law is obligatory.

Have a great weekend.

The Word's The Thing

Arbitration is typically looked upon as a cost-effective and expeditious alternative to the judicial resolution of disputes. Generally, an arbitrator’s award is final and cannot be appealed or vacated except upon certain limited, specific grounds. In New York, once an arbitration award is issued, judicial confirmation of the award must be sought; arbitration awards generally lack any legal effect of their own. During the confirmation process, the party against whom the award was issued may move to vacate the award, inter alia, on grounds that it lacked a rational basis or was in excess of the arbitrator’s authority. That’s what happened in Goldberg v. Thelen Reid Brown Raysman & Steiner LLP, NYS Supreme Court (N.Y. Co., Index No. 650164/07, Decided: October 10, 2007).

In Goldberg, the Petitioner, a former employee of Respondent, moved to confirm an arbitration award issued in his favor which found that Respondent had breached his employment contract. The Respondent cross-moved to vacate the award, arguing that the termination was for good cause since the Petitioner failed to bill or originate sufficient business as required by the employment agreement. During the arbitration, the Petitioner claimed that he had no contractual obligation to bill a minimum number of hours. Respondent maintained that the Petitioner was hired based upon his representations that he was billing $2 million that year for his then current employer. Apparently, the Petitioner was ready, willing and able to work, and actively sought out billable work, but Respondent failed to offer him the opportunity to bill those hours.

The arbitrator found that the contract was silent with respect to any requirement that Petitioner meet certain billing or origination goals. The arbitrator also found that the Petitioner would have been able to work more hours but for Respondent’s failure to offer same. The fact that the contract was silent as to whether Petitioner could be terminated for “good cause” based on his failure to meet certain, unstated billing or business origination goals was critical to the arbitrator’s decision.

In granting the Motion to confirm and denying the Cross-Motion to vacate, the court held that the Respondent failed to show either that the arbitrator's award was violative of public policy, totally irrational, or exceeded a specifically enumerated limitation of power (citations omitted). The court further held that the award was carefully reasoned, considered the plain meaning of the language contained in the employment contract, and also considered that the Petitioner’s efforts at performing billable work were frustrated by Respondent.

Words mean things, but the lack of words may mean even more. That’s the moral of the story in Goldberg.

Lawyer Joke Friday

The weather is rainy and nasty here in old New York. It's a good day to stay inside and eat mac and cheese. It's also a good day for another lawyer joke. So, here we go.

A reporter outside of a courtroom asked a defendant, clad only in a barrel: “Oh, I see your attorney lost the case!” The defendant answered: “No, we won.”

Have a great weekend.

To Pay Or Not To Pay ... That's NOT The Question

In yet another in the long line of cases upholding payment to illegal immigrants for work performed, we have Jara v. Strong Steel Doors, Inc. (NYS Supreme Court, Kings Co., index no. 14643-05, decided September 12, 2007).

In Jara, the Plaintiffs (illegal immigrant workers) brought a class action alleging that they, and others similarly situated, were not paid prevailing wages, supplemental benefits and overtime compensation by Defendants for work performed on various public works construction projects. The Defendants moved, inter alia, for partial summary judgment based on: (a) a claim that one of the Plaintiffs had submitted fraudulent documents when applying for employment with one of the Defendants in violation of the Immigration and Reform Control Act of 1986 (“IRCA”), which criminalizes the presentation of forged evidence of entitlement to employment within the United States; and (b) the decision of the United States Supreme Court in Hoffman Plastic Compounds, Inc. v. National Labor Relations Board, 535 US 137 (2002), which held that an illegal alien who gained employment by presenting false work authorization documents was not entitled to backpay for work that he would have performed absent a wrongful termination in violation of the National Labor Relations Act.

In denying the Motion, the court held that the decision in Hoffman was inapplicable since the case concerned an award of backpay for work not actually performed and did not establish that an award of unpaid wages for work that was performed ran counter to IRCA. The court noted that unlike the facts in Hoffman, the Plaintiffs actually performed the work in issue and that the workers’ failure to comply with IRCA did not permit an employer to disregard State prevailing wage requirements in a public works contract.

Look, folks. This is not rocket science. As a general proposition, anybody who performs work is entitled to be paid regardless of their immigration status or whether such person has presented fraudulent documentation in connection with their employment. There is simply no such thing as “free” labor under the law, yet despite this basic concept, the number of employers who continue to think otherwise continues to astound me.

Lawyer Joke Friday

The devil visited a lawyer's office and made him an offer. "I can arrange some things for you," said the devil. "I'll increase your income dramatically, your partners will love you, your clients will respect you, you'll have four months of paid vacation each year, and you'll live to be a hundred. All I want in return is the souls of your wife, your children and your grandchildren to rot in hell for eternity."

The lawyer thought for a moment. "What's the catch?" he asked.

I like this one.

The "Truth" May Lay Somewhere In The Middle

Recently, I've had occasion to deal with some brethren and sisters of the bar who steadfastly maintain that their clients are "right" even when confronted with documentary or physical evidence to the contrary. I've also recently had experiences with attorneys who refuse to acknowledge any position or set of facts other than those related to them by their client. Come hell or high water, "their" client is correct. Damn the torpedoes and full speed ahead! This is not only frustrating, but has led to unnecessary and costly litigation which, in the final analysis, fails to serve the client's interests. Legal fees mount and substantive results take an inordinate amount of time. While I'm all for zealous advocacy, I don't believe that an attorney should conduct the representation with blinders in place. Unfortunately, this appears to be the case more and more.

Although it's an elementary concept, there are two sides to every story. In many (but not all) instances, the "truth" lies somewhere in the middle. Those who ignore or refuse to even consider that reality do their clients and the legal system a great disservice. IMHO, a pragmatic approach to a legal problem is far more beneficial to all involved than a trench warfare mindset. I hope many of my colleagues will agree.