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.
Effective January 1, 2024, the Rhode Island Payment of Wages Act, R.I. Gen. Laws § 28-14-1, et seq. (“Wage Act”) will make a “knowing and willful” wage and hour violation punishable as a criminal felony. Should an employer, or its agent, engage in such a violation regarding a failure to pay wages of more than $1,500 or misclassify workers as independent contractors in the construction industry, the employer may be criminally prosecuted and may face imprisonment for up to three years and/or a fine of up to $5,000.
Which Wage Violations Could Result in a Felony Conviction and/or Fine?
Pursuant to the Wage Act, as amended, an employer’s agent or officer could face a felony, imprisonment, and possibly a fine if it fails to pay wages owed and/or vacation pay to any eligible employee who separates from employment. Moreover, an employer may face the same criminal penalty if it fails to pay wages and benefits owed within 24 hours of the time of separation, if an employer is liquidating the business, merging, or removing the business out of state. Other wage violations that could result in a criminal penalty include an employer’s failure to pay wages to a family member of a deceased employee within 30 days of death and failure to pay the full monetary amount lawfully owed to an employee on the next regular payday.
Misclassification of Employees
The amendment to the Wage Act also penalizes employers, and, specifically, employers in the construction industry, that misclassify workers as independent contractors.1 As for employers generally, an employer will be liable for a civil penalty for each misclassified employee, where the first offense results in a monetary penalty between $1,500 and $3,000 and up to $5,000 for each subsequent misclassified employee.
The Wage Act also specifically addresses employers in the construction industry and provides even greater penalties. Employers in the construction industry that “knowingly and willfully” misclassify employees shall be subject to: (1) a misdemeanor and one year of imprisonment and/or a fine of up to $1,000 if the amount of misclassified wages does not exceed $1,500; and (2) a felony and three years of imprisonment and/or a $5,000 fine for the construction employer that receives their second violation for misclassification.
What Constitutes a Knowing and Willful Violation?
Although the new law imposes criminal liability only on “knowing” and “willful” violations, the Wage Act does not include a definition of these terms. The Rhode Island Superior Court has held that an employer that engages in a repeat violation has acted knowingly and willfully.2 Under the federal Fair Labor Standards Act, a “willful” violation is a deliberate, voluntary, or intentional act.3
Although a wage violation and misclassification previously could result in a misdemeanor and was rarely invoked, Rhode Island’s attorney general made significant efforts during the 2023 legislative session to support this amendment and obtain a heightened penalty for such violations.4 The Rhode Island attorney general has commented that “changing wage theft from a misdemeanor to a felony allows his office to go after construction companies that leave the state,” and, explicitly stated, “[i]t will allow us to extradite people from other states.” The amendments to the Wage Act include a detailed complaint procedure for misclassification claims involving the Rhode Island Department of Labor and Training (RIDLT) and mandate that the RIDLT recommend to the attorney general whether to criminally prosecute a matter for misclassification. This mandatory reporting element does not apply to wage violations other than misclassification.
Who Is the Individual that Will Serve the Imprisonment Term?
The Wage Act applies to all employers, regardless of size or number of employees. Based on the plain language of the Wage Act, however, it is unclear precisely which agent of an employer might be criminally penalized for wage violations. The Wage Act defines “[e]mployer” as “any individual, firm, partnership, association, joint stock, company, trust, corporation, receiver, or other like officer appointed by a court of this state, and any agent or officer of any of the previously mentioned classes, employing any person in this state.”5 Further, “[a]ny employer who knowingly and willfully violates . . . shall be guilty of a felony.”6 Federal law defines “employer” in this context as “any person acting directly or indirectly in the interest of an employer in relation to an employee.”7 Under the FLSA, courts have held both corporate officers and agents personally liable for such violations, including presidents, chief executive officers, vice presidents, general managers, and operation managers.8 Thus, corporate officers and agents could be subject to the new criminal penalties under state law.
Key Takeaways for Rhode Island Employers
As of January 1, 2024, this amendment to the Wage Act will now place significant risk of a substantial criminal penalty on employers for violations of misclassification and wage laws. Below are some key takeaways and thoughts as these issues evolve:
- The new criminal penalties appear to be aimed at misclassification claims. Criminal penalties for wage violations, however, should not be ruled out.
- The absence of a clear definition of the term “knowingly and willfully” leaves employers without clear guidance on what conduct may be subject to criminal penalties.
- Wage and hour laws involve a complex statutory scheme, making it not uncommon for an employer to make an unintentional misstep. Now, more than ever, employers should seek counsel on wage and hour compliance prior to the January 1, 2024, effective date of these amendments.
Littler will continue to provide updates on significant developments with this law and any Rhode Island developments as they emerge.
1 The amendment to the Wage Act sets forth a mechanism for the Rhode Island Department of Labor and Training to investigate a complaint alleging a misclassification of a worker and refer an underlying complaint to the attorney general for criminal prosecution.
2 Allied Elec. Group, Inc. v. Rhode Island, No. PC20133514, 2014 WL 4412619, at *6 (R.I. Super. Sep. 03, 2014)
3 29 U.S.C. § 216(a); see also Nabob Oil Co. v. United States, 190 F.2d 478 (10th Cir. 1951).
4 AG Neronha Seeks to Strengthen Penalties for Wage Theft, Labor Violations, State of Rhode Island Attorney General Peter F. Neronha Press Release, February 24, 2021, https://riag.ri.gov/press-releases/ag-neronha-seeks-strengthen-penalties....
5 Sec. 28-14-1(5) (emphasis added).
6 Sec. 28-14-17(b).
7 29 U.S.C. § 203(d).
8 See Chao v. Hotel Oasis, Inc., 493 F.3d 26 (1st Cir. 2007); see also De Guzman v. Parc Temple LLC, 537 F. Supp. 2d 1087 (C.D. Cal. 2008); see also Ethelberth v. Choice Sec. Co., 91 F. Supp. 3d 339 (E.D.N.Y. 2015); see also Moon v. Kwon, 248 F. Supp. 2d 201 (S.D.N.Y. 2002); see also Herman v. Hogar Praderas de Amor, Inc., 130 F. Supp. 2d 257 (D.P.R. 2001); see also Perez v. Lorraine Enterprises, Inc., 769 F.3d 23 (1st Cir. 2014); see also Guifu Li v. A Perfect Day Franchise, Inc, 281 F.R.D. 373 (N.D. Cal. 2012).