Hudacs v. Frito-Lay, Inc., 86 N.Y.2d 342 (1995)
An employer does not violate Labor Law § 193 when it requires route salespeople to remit funds collected from customers, as these repayments are independent of wage payments and represent the return of company funds.
Summary
Frito-Lay employed route salespeople who delivered snacks to retailers and collected payments. Salespeople deposited cash payments into their own accounts and then remitted funds to Frito-Lay. The company required reimbursement for any discrepancies between products taken and money remitted, but allowed setoffs for spoilage, theft, or bounced checks. The Labor Commissioner argued this violated Labor Law § 193, which prohibits unauthorized wage deductions. The Court of Appeals held that requiring salespeople to remit collected funds did not violate the statute because the funds were company property, not wages, and the reimbursement was independent of wage payment.
Facts
Frito-Lay route salespeople picked up snack foods from warehouses, delivered them to retailers, and collected payments. Retailers paid via charge tickets, checks to Frito-Lay, or cash. Salespeople deposited cash into their personal accounts and then mailed checks or money orders (for cash receipts) to Frito-Lay. Frito-Lay reimbursed money order costs. Every 20 days, Frito-Lay issued accounting reports detailing transactions and requiring reimbursement for any discrepancies between product taken and money remitted. The company allowed setoffs for damaged goods, bounced checks, or theft.
Procedural History
The Commissioner of Labor issued an order to comply, alleging Frito-Lay’s practices violated Labor Law § 193. The Industrial Board of Appeals revoked the order, finding the payments independent from wages. Supreme Court reversed, reinstating the Commissioner’s order. The Appellate Division reversed again, upholding the Board’s determination. The Court of Appeals granted leave to appeal.
Issue(s)
Whether Frito-Lay violated Labor Law § 193 by requiring its route salespeople to remit moneys collected from customers upon delivery of inventory, when there were discrepancies between product taken and money remitted.
Holding
No, because the required payments were not deductions from wages, but rather the remittance of company funds temporarily entrusted to the employee’s control. The court reasoned these repayments to the company were unrelated to and independent from the payment of wages.
Court’s Reasoning
The Court reasoned that Labor Law § 193 prohibits unauthorized deductions from wages. While the statute forbids “any payment by separate transaction,” the Court interpreted this to refer to payments from wages, not the remittance of company funds. The funds collected by the salespeople were Frito-Lay’s property, and the company had a right to expect full remittance. The court distinguished this situation from typical service worker cases (cashiers, waiters) where shortages result from mishandling funds within the workplace. Frito-Lay employees had extended control over company funds, depositing them into personal accounts, creating an obligation to remit the funds. Allowing setoffs for losses not due to failure to remit funds aligned with the statute’s intent to place the risk of loss for damaged goods on the employer. The Court stated, “It is this element of extended control over funds belonging to the company outside of a discrete workplace that distinguishes this case from that of more typical service workers such as supermarket cashiers or waiters, and our decision today should not be read as validating payback schemes aimed at such employees.” The Court found the Board’s interpretation of the statute rational and consistent with its purpose. The court found that Labor Law § 193 was not intended to allow employees to refuse to fully remit funds they collect from customers to the company.