Legal Updates

New York to Extend Risk of Liability For Unpaid Wages to Prime Contractors and Construction Managers

The New York State Senate passed a bill, S2766-C, which will add a new section to NY Labor Law § 198. The Changes will, in addition to other things, impose greater liability risk on prime contractors and reporting requirements on subcontractors. The bill will impose complete liability on prime contractors or construction managers for non-payment of wages by their subcontractors, regardless of how far down the chain of subcontractors the failure to pay occurs.

The new law will any worker (or a party acting on there behalf, such as the attorney general or a union) may from both their employer and the prime contractor on the project. Critically, liability does not extend to intermediate subcontractors, construction managers.

General Business Law § 756 will also now require subcontractors performing work on a project to furnish the Prime Contractor and/or Construction Manager with employee names, contact information and wage and benefit details. Prime Contractor must now be able to determine how much would be owed to the worker and confirm that full wages and benefits are paid. The law new law will however make the failure to provide this information justification for withholding of payments to any subcontractor of any tier.

New York City Landlords of Smart Access Buildings to be Subjected to New Regulations under the New Tenant Data Privacy Act

On May 28, 2021, New York City enacted privacy legislation that specifically targets owners of multifamily dwellings. The Tenant Data Privacy Act (TDPA) addresses perceived privacy issues surrounding the use of smart access systems in multi-family dwellings and is modeled, in part, after broader European and California privacy legislation. Among other things, it requires that all owners of Class A multiple dwellings that use smart-access systems (e.g., key cards, phone access, fingerprint) take the following steps:

Provide tenants with a privacy notice.
Obtain consent for the use of smart access systems.
Establish data retention periods for collected data.
Ensure that collected data is not sold or shared.
Create parameters surrounding the tracking of tenants.
Protect data that they collect.

The law goes into effect in 60 days, but multifamily residential landlords in New York City who own existing smart access buildings have been given an 18-month grace period, until Jan. 1, 2023, to come into compliance with the new requirements. Should a smart access building go online for the first time in, for example, August 2021 (after the law takes effect but before the grace period for existing smart access buildings ends), the statute will apply immediately.

The TDPA is one of the first statutes nationwide to regulate the collection and retention of data from residential multifamily “smart access” buildings. While some residential landlords in other jurisdictions, such as California, have been impacted by broad privacy legislation like the California Consumer Privacy Act, the TDPA is one of the first attempts by any jurisdiction to specifically mandate that residential landlords take steps to protect tenant privacy. As a result, it is likely to have an impact on both commercial and residential landlords, as well as landlords outside of New York City, that are concerned about best practices or similar legislation being enacted in other jurisdictions.

DOL proposes new rules on FLSA "Tip Credit" regulations

On June 21, 2021, the U.S. Department of Labor (DOL) announced proposed rules setting forth new tip regulations under the Fair Labor Standards Act (FLSA).

These new rules would reinstate the so-called “80/20” rule under federal law and impose further limits on when and to what extent an employer may take a tip credit against its minimum wage obligations to employees. If enacted, the regulations would have a significant impact on businesses that employ tipped workers, such as restaurants, hotels and other hospitality-sector employers.

Specifically, the DOL’s proposed rule would:

Prohibit employers from taking a tip credit against their tipped employees’ wages for time spent performing work that does not directly support their tip-producing work (e.g., restaurants could not assign servers to prepare food or clean restaurants as part of their “side work”)
Limit the amount of “directly supporting” side work (e.g., servers folding napkins or refilling salt and paper shakers) that employees could perform at the tip credit rate to no more than: (a) 20% of tipped employees’ working time; or (b) 30 consecutive minutes at a time.

As New York law already imposes the “80/20” rule, the most significant change that these new FLSA rules would have for New York hospitality employers is that tipped employees could no longer commence work more than 30 minutes before service begins or work for more than 30 minutes after service ends at the tip credit rate. Instead, employers would be required to pay tipped employees at the regular minimum wage (or higher) for such pre-service and post-service work.

Of course, regardless of its length, such pre-service and post-service work would be counted as non-tipped work. Furthermore, under New York law, if, in the aggregate, such non-tipped work consists of more than 20% of the employee’s time or more than two hours in any one day, then a tip credit can never be taken for any work performed on that day.

In certain jurisdictions outside New York, hospitality employers might be able to pay tipped employees at the full minimum wage solely for their pre- and post-shift side work, while paying those employees at the tip credit rate during service. However, tracking such time could be cumbersome especially with electronic time-keeping systems as those employees would need to be employed under two different job codes and clock in (and out), as appropriate.

The DOL will be publishing the proposed rule in the Federal Register on June 23, 2021. The public will have 60 days to comment on the proposed rule before further action is taken by the DOL. While employers do not need to take any action in response to the DOL’s notice of proposed rulemaking, employers should monitor any developments closely and consult with counsel if and when any new regulations are enacted.

New York First Department Appellate Division Allows a Gerrymandering Zoning Lot to avoid 'Undue Hardship' to Developer

Matter of Committee for Sound Development et al. v. Amsterdam Avenue Development Associates et al., (Index No. 157273/19 Appeal No. 12658 Case No. 2020/01872)

Southern District of New York Finds that Governor Cuomo's State of Emergency constituted an "Act of G-d"; preventing enforcement of a contract under a Force Majeure Clause

JN Contemporary Art LLC v. Phillips Auctioneers LLC, 2020 WL 7405262 (S.D.N.Y. Dec. 16, 2020