Rhode Island's Payment of Wages Act Imposes Felony Penalties on Employers

​Effective Jan. 1, 2024, the Rhode Island Payment of Wages 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.

Pursuant to the Payment of Wages Act, as amended, an employer's agent or officer could face a felony, imprisonment, and/or 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 law penalizes employers in the construction industry that misclassify workers as independent contractors. Employers in other industries 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.

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.

Although the new law imposes criminal liability only on "knowing" and "willful" violations, it 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. Under the federal Fair Labor Standards Act (FLSA), a "willful" violation is a deliberate, voluntary, or intentional act.

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. 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 "it will allow us to extradite people from other states."

The new amendments to the law 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.

The law applies to all employers, regardless of size. Based on the plain language of the law, however, it is unclear precisely which agent of an employer might be criminally penalized for wage violations. 

The state law defines employer 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."

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." 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. Thus, corporate officers and agents could be subject to the new criminal penalties under the amended state law.   

Key Takeaways for Employers

As of Jan. 1, 2024, this amendment to the state law will now place significant risk of a substantial criminal penalty on employers for violations of wage laws. The new criminal penalties appear to be aimed at misclassification claims. Criminal penalties for other 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 Jan. 1, 2024, effective date of these amendments.

Julia R. Shackleton and Jillian Folger-Hartwell are attorneys with Littler in Providence, R.I. © 2023. All rights reserved. Reprinted with permission.