New York State Senate Poised to Pass Expansive Lien Law for Wage Claims

UPDATE: On June 4, 2022, the New York Legislature adjourned prior to the New York State Senate voting on the SWEAT bill.  As a result, the SWEAT bill will not proceed to a vote before the New York Senate.  Littler will continue to track developments regarding any similar introduced bills in subsequent legislative sessions.  

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The New York State Senate is poised to pass an employee-friendly bill that would amend New York’s lien law to enable employees to, upon filing a wage claim, obtain a temporary lien against their employer’s (or alleged employer’s) assets.  A substantially similar bill was passed by the New York State Assembly and Senate in 2019 (S2844B) but vetoed by then-Governor Cuomo in early 2020. 

Assembly Bill A766, referred to as the Securing Wages Earned Against Theft (SWEAT) bill, would empower workers to obtain an “employee’s lien” against an “employer”1 upon asserting a “wage claim.”  The term “wage claim” is broadly defined as:

…a claim that an employee has suffered a violation of sections one hundred seventy, one hundred ninety-three, one hundred ninety-six-d, six hundred fifty-two or six hundred seventy-three of the [New York Labor Law] or the related regulations and wage orders promulgated by the commissioner, a claim for wages due to an employee pursuant to an employment contract that were unpaid in violation of the contract, or a claim that an employee has suffered a violation of 29 U.S.C. § 206 or 207.

It is unclear under the SWEAT bill whether an employee must affirmatively file a lawsuit, or actually file a claim with the Commission of Labor in order to obtain a lien, or whether an accusation alone is sufficient.  Regardless, the SWEAT bill would permit an employee to obtain an “employee’s lien” without proving, or even making a threshold evidentiary showing, that the alleged employer violated the Labor Law or has, in fact, improperly withheld any wages.  Instead, the SWEAT bill provides that an alleged aggrieved employee who “has a wage claim … shall have a lien on his or her employer’s interest in property for the value of that employee’s wage claim arising out of the employment,” including the value of liquidated damages.  The employee’s lien may be held against the employer’s interest in real property and personal property, as defined in the New York Uniform Commercial Code (UCC), except as applicable to certain deposit accounts or goods defined in the UCC.  In effect, the employee lien could prevent an employer (or alleged employer) from conveying, selling or transferring real or personal property while the employee lien is in place.

The SWEAT bill provides that the employee must file notice of the lien no later than three years following the “end of the employment giving rise to the wage claim.”  For employee liens seeking to encumber an employer’s personal property, notice of the lien must be filed together with a “financing statement” in the New York filing office set forth in the UCC.  Notice that employee has sought a lien to encumber an employer’s real property must be filed in the clerk’s office in the county where the real property is situated.  In addition, the aggrieved employee must, within 35 days after filing notice of the  lien, file the lien itself within the county clerk’s office or the New York Secretary of State’s office (depending on whether the lien seeks to encumber real or personal property).  Once the lien has been filed, the lien will be in effect for one year, unless the employee files for a one-year extension.  If an employee commences action for judgment on a wage claim, the lien only expires 120 days after entry of a final judgment.

The SWEAT bill, if passed without amendments, would provide a tremendous amount of leverage to employees.  In effect, employees would be empowered to put liens on the property of their alleged employer (including both company property and individual property) by merely making an accusation of a wage and hour violation, rather than after a finding of liability.  Such a lien could potentially stay in place until any disputed issue is litigated to an adjudication or resolution, which could take years.  The SWEAT bill does not address how alleged employers can attempt to remove employee liens.

Employers raised numerous concerns, including potential constitutional concerns, when the SWEAT bill’s prior incarnation, S2844B, was passed by the New York State Assembly and Senate in 2019.  Then-Governor Cuomo vetoed the bill in early 2020, citing “technical aspects” and concerns regarding the bill’s constitutionality.  The issues raised by employers in 2019 are not addressed in the current SWEAT bill, which remains nearly identical to S2844B.  Thus, presumably the same legal challenges and issues cited by employers and other interested groups regarding S2844B exist with respect to the SWEAT bill, and legal challenges may follow should Governor Hocul sign the SWEAT bill into law without amendment.  Governor Hocul has not yet expressed an opinion on the SWEAT bill.

See Footnotes

1 The SWEAT bill defines employer as “hav[ing] the same meaning as ‘employer’ pursuant to articles one, six, nineteen and nineteen-a of the [New York Labor Law], as applicable, or the Fair Labor Standards Act, 20 U.S.C. § 201 et. seq., as applicable, except that the term ‘employer’ shall not include a governmental agency.”  The SWEAT bill does not address, among other things, how it would apply in circumstances where an alleged “employer” disputes that it employed an individual.

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.