It is well settled in New York that a party may not bring a class action lawsuit in State Court for a violation of a New York statute if the statute authorizes the prevailing party to collect a penalty. This is because New York CPLR § 901(b) prohibits class actions in suits seeking penalties or statutory minimum damages. The express language of NY CPLR §901(b) states that, "Unless a statute creating or imposing a penalty or a minimum measure of recovery specifically authorizes the recovery thereof in a class action, an action to recover a penalty, or minimum measure of recovery created or imposed by statute may not be maintained as a class action."
New York Labor Law Articles 6 (payment of wages) and Article 19 (New York Minimum Wage Act) both allow successful plaintiffs to recover liquidated damages. Liquidated damages under New York Labor Law are considered a penalty for purposes of CPLR 901(b) and, accordingly, absent anything more, an action to recover wages and liquidated damages is not maintainable as a class action in state court. Carter v. Frito-Lay, Inc. (1981).
However, it is undisputed that an employee may elect to waive his or her right to seek liquidated damages. "Consequently, the law is now well established in New York that, in the context of an action presenting allegations of Labor Law wage violations, 'the correct rule' is that, if the named plaintiff waives the statutory penalty, the action may be maintained as a class action as long as class members are afforded the obtain of opting out so that they may pursue all statutory remedies." Krebs v. Canyon Club, Inc. (N.Y. Sup. 2009).
It's important to note that this limitation only applies in State court and not in Federal court. On March 31, 2010, the United States Supreme Court issued a significant decision, in which it rejected these limitations on class actions heard in federal court.
In Shady Grove Orthopedic Assocs., PA v. Allstate Ins. Co. (Mar. 31, 2010), the US Supreme Court held that New York CPLR § 901(b) conflicts with Federal Rule of Civil Procedure 23 and thus cannot be applied by a federal court sitting in diversity.
If you have any questions regarding whether or not to file your class action wage and hour lawsuit in Federal or State court, it's always smart to consult with a New York City wage and hour attorney.
