The Court of Appeals recently released three decisions—relating to carefully and narrowly framed issues under the New City Landmarks Preservation Law; New York State Department of Labor’s Minimum Wage Order; and Article 7 of the New York Real Property Tax Law—that are of particular interest to practitioners in those fields of law.  Of more interest to the Bar generally are the pointed, strident and unusually caustic dissents of Judge Rivera (joined by Judge Wilson) in the Landmarks case; Judge Garcia (joined by Judge Fahey) in the Labor Law action; and Judge Wilson (joined by Judge Rivera) in the Tax Law proceeding.

Matter of Save America’s Clocks, Inc. v City of New York
219 NY Slip Op 02385
Decided on March 28, 2019

Was the City’s Landmarks Preservation Commission’s decision to allow the clock tower at 346 Broadway—previously designated an interior landmark—to be converted to private space and to be altered irrational and affected by errors of law? Answer: The decision was proper (4 Judges to 2).

The Landmarks Preservation Law was passed in 1965 as a response “to the loss of a number of [New York City’s] significant buildings”. The law was “not” designed for public “acquisitions of historic properties”; rather it “provid[ed] services, standards, controls and incentives that will encourage preservation by private owners and users.”

In 1973, the law was amended to allow the LPC to designate an interior landmark, defined as “[a]n interior, or part thereof, any part of which is thirty years old or older, and which is customarily open or accessible to the public, or to which the public is customarily invited, and which has a special historical or aesthetic interest or value.”

346 Broadway is the old New York Life Insurance Company headquarters. The fifteen-story structure, completed in the late 1890s, was designed in part by the historically significant architectural firm of McKim, Mead & White. The City acquired the building in 1968, and it was during this period of City ownership, in 1987, that the LPC designated the building and parts of its interior as landmarks; including the clock tower.

In its initial designation report, the LPC noted several of the building’s unique features. The exterior of the “palazzo-like tower,” constructed in “the neo-Italian Renaissance style,” was largely built with “white Tuckahoe marble.” The “interiors” were also “designed using the finest craftsmanship and lavish materials” including “marble, bronze, [and] mahogany.” Among the interior spaces designated were the former “Banking Hall,” a “grand and boldly scaled neo-Classical room” with “monumental freestanding Corinthian columns, and “[t]he clock tower” which housed a “No. 4 Striking Tower Clock”—a mechanical clock driven “by a thousand pound weight” which “strikes the hours” with a hammer and a “5000 pound bell.” The clock was manufactured by E. Howard Watch & Clock Company and “was specially equipped with a double three-legged gravity escapement”—a feature, shared by only one other tower clock: the clock housed by Elizabeth Tower (also home to the bell known as Big Ben) in London. In total, the LPC landmarked 20,000 square feet out of the building’s total interior space of 420,000 square feet.

In December 2013, the City sold the building to Civic Center Community Group Broadway LLC, a private developer. After purchasing the building, the developer sought approval from the New York City Department of Buildings to convert the building into private residences. The developer’s plan was approved by DOB in June 2014. The developer next sought a certificate of appropriateness from the LPC.

The developer’s initial proposal, presented to the LPC at a public hearing in November 2014, included new windows, removal of an outdated fire escape, restoration of building entrances, addition of a new entrance, removal of a deteriorating parapet and addition of a fence and gate inspired by similar structures designed for other sites by the original architectural firm. With respect to the interior, the owner proposed to, among other things, restore the main lobby and the banking hall and restore and relocate the president’s office. The clocktower mechanism would be kept in its original location and the building and area around it restored and weatherproofed. Under the proposal, the banking hall and lobby would remain publicly accessible. Questions were raised, however, about access to the clocktower, which was to be part of a private residence, as well as about the continued operation of the clock. During the hearing, LPC’s General Counsel stated that “there’s no power under the Landmarks Law to require interior-designated spaces to remain public.” Counsel also opined that the Commission was powerless to require that the clock mechanism remain “operable,” but noted that the developer intended to keep the clock running electrically.

After the public hearing, certain Commissioners and LPC staff members conducted a site visit. Shortly after that, at a second public meeting in December 2014, the Commission approved the proposal by a vote of 7-1. The dissenting commissioner voted against the proposal because she “[could] not approve the changes to the [clock] mechanism itself and to the interior of the clock tower gallery, as well as mechanical room.”

A proceeding challenging the COA ensued. Petitioners—a coalition of entities and individuals—agreed to limit the scope of litigation to the decisions to limit public access to the clock tower and to run the clock electrically. Supreme Court annulled the COA concluding that the decision to “eliminate public access to the clock tower” was “irrational and arbitrary,” but that there was a rational basis for the conversion of the clock from mechanical to electrical operation. Nevertheless, the court determined that the decision to electrify the clock was affected by an error of law because LPC Counsel’s advice that the LPC could not regulate the functioning of the clock was incorrect. Similarly, LPC Counsel’s advice on public access was wrong, according to the court, because “the general provisions of the Landmarks Law vest the Commission with the power to regulate an interior landmark.”

A divided Appellate Division affirmed. The majority agreed with Supreme Court that the decision to discontinue public access to the clock tower was irrational because “it [was] inconsistent with the statutory definition” of interior landmark, and also found the decision to electrify the clock irrational. The majority also agreed with Supreme Court that LPC’s General Counsel gave incorrect advice during the public hearings about the LPC’s authority to require public access and dictate how the clock functioned. That advice, the majority found, affected the Commission’s vote on the COA—a determination the majority based on portions of the hearing transcript. The dissent concluded that, based on the record, the LPC’s decisions were rational, and that no error of law infected the proceedings because: (1) counsel’s advice was correct; and (2) the LPC vote would not have been affected even if the advice was incorrect.

Judicial review of the Commission’s findings by the Court of Appeals was limited to whether “the determination was made in violation of lawful procedure, was affected by an error of law or was arbitrary and capricious or an abuse of discretion”. “This review was deferential for it is not the role of the courts to weigh the desirability of any action or choose among alternatives”. “[T]he courts cannot interfere unless there is no rational basis for the exercise of discretion” or “the action is without sound basis in reason . . . and taken without regard to the facts”. It follows that “[i]f the court finds that the determination is supported by a rational basis, it must sustain the determination even if the court concludes that it would have reached a different result than the one reached by the agency.”

Petitioners argued that the LPC’s decision to close off the clocktower was inconsistent with the statutory definition of interior landmark and is therefore facially irrational. It was the LPC’s position that “public access was a threshold condition, not an ongoing one,” and “public access at designation is no more than the foothold that allows the Commission to exercise the police power to regulate private property.” The majority agreed that consistent with our [prior] holding that public access is a “jurisdictional predicate” for an initial LPC designation. A designation, did not foreclose the possibility of “private use in the future”. Underscoring this, the law contemplated that the LPC may issue a COA for “demol[ition] of any improvement”—which is defined to include “building”—”containing an interior landmark”. As the LPC noted, the COA “process presumes change, sometimes dramatic change.” The court held that the Landmarks Law makes plain that the LPC’s decision with respect to the clock tower was well within the ambit of its discretion.

Contrary to petitioners’ claims, the LPC’s decision to allow the clock to be electrified was similarly rational. “[T]he operation of the clock would be modernized by electrification, thereby assuring its continued maintenance for the foreseeable future, and the visibility of exterior clock faces to the public would be enhanced by LED or some other form of modernized lighting, while the clock faces would remain in their original, pristine condition”. The COA also made plain the LPC’s finding that the developer’s plan would ensure that “the clock mechanism and faces will be retained, thereby preserving these significant features.” The LPC was well within its discretion to approve a plan that included electrification of the clock.

The LPC’s determination to issue the COA following on extensive and inclusive deliberative process, and to approve certain work to the clock tower and clock mechanism on the basis that the proposed work would restore the clock tower rooms and both retain and preserve the interior and exterior features of the clock mechanism and faces, constituted a rational exercise of the LPC’s discretion based on its unique expertise. Those determinations were consistent with the purposes of the Landmarks Law. Moreover, in approving a project that would restore the clock tower and ensure the clock’s continued operation along with the preservation of its components, it was manifest that the Commission “consider[ed] the effects of the proposed work upon the protection, enhancement, perpetuation and use of the interior architectural features of such interior landmark which cause[d] it to possess a special character of special historical or aesthetic interest or value”[.]

The Court of Appeals concluded that it could not be said that the Commission acted with “no rational basis”, and the Appellate Division erred in concluding otherwise.  Thus four judges voted to reverse the lowers court’s rulings.

Judge Rivera and Wilson dissented, while Chief Judge DiFore took no part in the decision.

The dissent noted that New York City was an architectural wonder; home to hundreds of landmarked structures and areas with unique cultural and historical value to the public. Some structures illustrated the grandeur and majesty of the City—Grand Central Terminal, the Empire State Building, the Chrysler Building, and the Brooklyn Bridge. Others depicted the City’s vibrant social and cultural life—the Coney Island Cyclone, the Rainbow Room in Rockefeller Center, the Apollo Theatre in Harlem, and the Paradise Theatre in the Bronx. Some were visible to the public from the street and fully appreciated in contrast to their surroundings, like the Sidewalk Clock at 161-11 Jamaica Avenue; others, like the Sailors’ Snug Harbor on Staten Island, provided a more intimate view of life and invited people to enjoy the internal settings of the past. Varying in size, fame, and use, these structures and spaces rooted the City in its complex and diverse history and embodied its indelible soul.

The dissent, relying on part on newspapers articles from the period, further elaborated on the unique and historical value of the former New York Life Insurance Company building.  Constructed in 1898, the building was part of the first wave of skyscrapers that heralded the dawn of the twentieth century. Designed by the renowned architectural firm McKim, Meade & White, which would later build Pennsylvania Station, the building was described as “one of the most striking projected improvements” in lower Manhattan. Its planning and assembly were noteworthy and garnered significant public attention.

The building’s clocktower was impressive both for its external magnificence and internal architectural and mechanical features. As the LPC’s designation report described, the four large faces of the clock were visible from the street and accented by a statue of “four-kneeling men supporting a skeletal globe surmounted by an eagle.” An 1898 New York Times article describing the upper stories of the City’s significant buildings—the newly termed skyscrapers—saw fit to include the clocktower elements.

The clock was manufactured by the E. Howard Watch & Clock Company and operated with a particularly rare double three-legged gravity escapement that was manually wound once a week. The mechanism was once praised as “the best time-keeping system used in buildings in the world.”

In 1987, when the LPC designated parts of the building’s interior as landmarks, the designation report noted that the “clock and clocktower interior, which have not been altered, are a rarity in New York City.” The report described features of the clock mechanism as well: its manufacture by the E. Howard Watch & Clock Company, its 1,000-pound weight, and its need to be wound on a weekly basis. In particular, the report emphasized the functioning mechanism’s import, stating “[t]he clock is one of the few remaining in New York which has not been electrified.”

The designation concluded:

[a]ccordingly, pursuant to the provisions of [the Landmarks Preservation Law], the Landmarks Preservation Commission designates as an Interior Landmark the . . . ; fourteenth floor interior consisting of the clocktower machinery room; . . . and the fixtures and interior components of these spaces, including but not limited to . . . clock machinery

Years later, recognizing that the clock mechanism needed regular maintenance, the LPC urged the City to appoint a City Clock Master. The LPC called the six remaining mechanical public clocks in the City “public treasures”, that “are not simply decorative elements on distinguished buildings, [but] truly urban amenities.” The mayor agreed and stated at the appointment ceremony of the Clock Master of the City of New York that the clocks were “works of art,” with extraordinary designs and “mechanical innards.'” The mayor further acknowledged “[i]t is crucial that we carefully preserve and safeguard our City’s architectural heritage and [that] the large mechanical clocks are an especially public and important part of that heritage.” For 35 years, the clock in the former New York Life Insurance Company building worked without disruption; the Clock Master, Marvin Schneider, wound and maintained the clock, giving weekly public tours of the clocktower.

In 2013, the City sold the building to Civic Center Community Group Broadway LLC, for $145 million. At the time of the transfer, the deed expressly stated that the purchase was subject to “Notice of Landmark Designation, recorded May 25, 1989.” Civic thus knowingly purchased more than a building with an artistic interior; it bought a historically significant structure, protected by law and intended to be preserved for public enjoyment. Indeed, Civic and its partner sought to capitalize on the designation by advertising the building as a “Renaissance-Revival palace,” whose exterior and interiors were “designated as New York City landmarks” that will house luxury condominium residences and possibly a boutique hotel.

Approximately 10 months later, Civic applied for a certificate of appropriateness with a 103-page proposal. Civic had acquired the necessary Department of Building permits and sought the LPC’s approval to restore the exterior and interior of the building. Civic planned to replace much of the exterior with new fixtures in the style of the original architecture, renovate the Banking Hall, and convert the rest of the building into residential properties.

Save America’s Clocks, a national horological preservation organization; the Historic District Council; Tribeca Trust; and other individuals involved in the preservation of the clock successfully challenged the LPC’s approval of the certificate. The majority reversed, concluding that the LPC’s decision was rational.

Judge Rivera disagreed, first, because the LPC permitted Civic to transform the clocktower, an interior landmark, from a publicly accessible space to a private luxury residence in contravention of the plain language of the Landmarks Preservation Law. The LPC’s decision effectively rescinded the clock’s landmark designation, an act which may only be accomplished by holding a public hearing, proposing rescission to the City Planning Commission, and obtaining approval of the rescission from the City Council and mayor. Second, the decision contravened the LPC’s statutory mandate to permit only those alterations that effectuated the purposes of the Landmarks Preservation Law. Such alterations did not include the conversion of a public treasure to a private apartment in a manner that irrevocably damaged the unique and defining historic characteristic of the interior landmark.

In reviewing the LPC’s decision, the dissent stated that the Court must determine whether it “was affected by an error of law or was arbitrary and capricious or an abuse of discretion.” An agency’s action is arbitrary and capricious where it lacks a rational basis and is taken without regard to the facts. An agency decision in excess of its authority is ultra vires, infected by an error of law, and cannot stand.

By approving alterations that rendered the clock mechanism inaccessible to the public, the LPC effectively rescinded the clock’s designation. Public access was an essential characteristic of an interior landmark. Nothing in the statute required unlimited round-the-clock access, but the opportunity for the public to view those features that warranted landmark designation was fundamental to the statute’s purposes. Indeed, the Landmarks Preservation Law was enacted because the destruction of historic sites wrought “irreparable loss to the people of the city,” and damaged the City’s position as a destination for visitors and tourists.

The LPC’s decision to allow Civic to deny public access to the clock and to disconnect the clock mechanism was in direct contravention of the Landmarks Preservation Law’s statutory purposes and public policy: the preservation of unique structures and spaces that reflect the City’s aesthetic, cultural, and historic values for everyone’s enjoyment. The Law expressly provides that it is intended to “promote the use of [designated landmarks]”. It authorized the LPC to issue certificates of appropriateness where “the proposed work would be appropriate for and consistent with the effectuation of the purposes of” the Landmarks Preservation Law and required the LPC to “consider the effects of the proposed work upon the protection, enhancement, perpetuation and use of the interior architectural features of such interior landmark which caused it to possess a special character or special historical or aesthetic interest or value”. These affirmative obligations required the LPC’s express attention to factors that impacted a designated landmark, the public’s use of it, and its continued viability as a public cultural asset. The Council mandated conservancy for the benefit of present and future generations. The Landmarks Preservation Law was not, as Civic would have it, for the benefit of those who can pay a high cost for private access. Nor was it intended to facilitate the desires of those who would rather do away with the public’s cultural assets because they posed an inconvenience to private interests. The Council’s intention was clear: to preserve these spaces “for the education, pleasure and welfare of the people of the city.”

The dissent concluded that the Landmarks Preservation Law recognized that the structures and sites that embodied the spirit of the City should be preserved even when commercial interests sought their destruction. The LPC designation in this case recognized that it was not just the elegant faces of the clock that warranted protection, but also the less visible mechanism that gave it meaning and historical significance. By approving Civic’s proposal to irrevocably alter the mechanics that defined the unique horological features of the clock and indefinitely denied public access to this interior landmark in violation of the Landmarks Preservation Law, the LPC’s decision was erroneous as a matter of law and should not stand.

Andryeyeva v. New York Health Care, Inc.
2019 NY Slip Op 02258
Decided on March 26, 2019

Pursuant to the NYS Department of Labor’s Miscellaneous Industries and Occupations Minimum Wage Order, must an employer pay non-residential home health care aide employees for each hour of a 24-hour shift. Answer: No (4 Judges to 2).

New York’s Labor Law requires that all employees be paid a minimum wage for each hour worked. The Legislature passed the Minimum Wage Act in 1937 to ensure that workers “receive wages sufficient to provide adequate maintenance and to protect their health.” In 1971, the Legislature extended the Act to cover home health care aides living outside the employer’s home and, in 1978 again amended the Act to require a minimum wage for “each hour worked.”

Since 1972, home health care aides have come under DOL’s Minimum Wage Order Number 11 for Miscellaneous Industries and Occupations. The Wage Order states, in relevant part:

“The minimum wage shall be paid for the time an employee is permitted to work, or is required to be available for work at a place prescribed by the employer, and shall include time spent in traveling to the extent that such traveling is part of the duties of the employee. However, a residential employee—one who lives on the premises of the employer—shall not be deemed to be permitted to work or required to be available for work:

• during [the employee’s] normal sleeping hours solely because [the employee] is required to be on call during such hours; or
• at any other time when [the employee] is free to leave the place of employment.”

This case involved joint appeals from orders affirming decisions of the trial courts to grant class certification. In both cases, plaintiffs contended that the defendant home health care agencies failed to pay the minimum wage for each hour of a 24-hour shift worked by non-residential aides.

DOL interpreted its Wage Order to require payment for at least 13 hours of a 24-hour shift if the employee (whether residential or non-residential) is allowed a sleep break of at least 8 hours — and actually receives five hours of uninterrupted sleep—and three hours of meal break time.

In March 2010, DOL issued an opinion letter, responding to questions about the application of the Wage Order to home health care aides, including the calculation of hours worked when assigned to a patient’s home, referred to as a “live-in employee.” The letter distinguished between employees who were “on call” — meaning employees who were considered to be working during all hours they are required to remain in a particular work area, including when they are waiting to perform their services—and employees who were “subject to call” such that they are able to leave the work area between assignments and are paid only for work performed.

The letter further acknowledged that a “residential employee,” defined in the Wage Order as a person who lives on the premises of the employer, is deemed not to be working during normal sleeping hours solely because they are “on call,” or when free to leave the place of employment. The letter went on to explain that DOL treated all “live-in” employees the same when determining the number of hours worked, regardless of whether they are residential employees.

The letter explained that home health care aides assigned to a 24-hour shift at a patient’s home were live-in, non-residential employees, who must be paid for at least 13 hours of work. Under DOL’s interpretation of the Wage Order, the remaining 11 hours of the shift are not included in the calculation of compensable hours because this time is allocated for eight hours of sleep and three hours of meal time for the employee. If the home health care aide does not receive a minimum of five hours uninterrupted sleep and work-free meal breaks, the employer must pay for every hour of a 24-hour shift—meaning the employer cannot exclude 11 hours from the compensable hours total—because when the aide is not provided with actual and substantial duty-free periods for personal use, the employer rather than the employee benefits from the time and the employer must pay for profiting off the employee’s labor.

This interpretation of the Wage Order was similar to the federal government’s guidance on the minimum compensable hours for 24-hour shift employees under the Fair Labor and Standards Act. According to the United States Department of Labor, when an employee is “required to be on call for 24 hours a day,” but has “a normal night’s sleep” and “ample time in which to eat . . . meals,” it may be “justif[ied to conclude] that the employee is not working at all times during which [the employee] is subject to call in the event of an emergency.” Under current federal regulations, an employer may exclude up to eight hours of sleep time from compensable time for employees who work 24-hour shifts, assuming certain conditions are satisfied[.]

DOL issued an emergency regulation in 2017 which added the following language to the Wage Order:

“Notwithstanding the above, this subdivision shall not be construed to require that the minimum wage be paid for meal periods and sleep times that are excluded from hours worked under the Fair Labor Standards Act for a home care aide who works a shift of 24 hours or more.”

In DOL’s Notice of Emergency Rulemaking, it announced that the emergency regulation was “needed to preserve the status quo, prevent the collapse of the home care industry, and avoid institutionalizing patients who could be cared for at home, in the face of recent decisions by the State Appellate Divisions that treat meal periods and sleep time by home care aides who work shifts of 24 hours or more as hours worked for purposes of state (but not federal) minimum wage.” The accompanying Regulatory Impact Statement explained that its interpretation had been long-standing, and evolved as legislative expansions covered workers in the home. DOL explained that by the 1970s, the Commissioner interpreted the minimum wage requirement to exclude sleep and meal periods for these groups of workers, and included this interpretation in formal guidelines, legal opinions, investigators’ manuals and the Commissioner’s determinations. The statement further stated that the Commissioner amended the Wage Order in 1986 to provide for overtime calculation in accordance with federal methodology and “grew increasingly to look to, and rely upon federal FLSA regulations interpreting” federal law regarding work hours, meal and sleep periods, “so that hours worked were calculated consistently at the state and federal level for overtime (and other) purposes.”

The issue before the Court was whether the Appellate Division erroneously disregarded DOL’s interpretation of its Wage Order.

Review of DOL’s interpretation of its Wage Order was quite circumscribed. As a general rule, “courts must defer to an administrative agency’s rational interpretation of its own regulations in its area of expertise.” Thus, an agency’s construction of its regulations “if not irrational or unreasonable,’ should be upheld.” However, “courts are not required to embrace a regulatory construction that conflicts with the plain meaning of the promulgated language.” Judicial deference to an agency’s interpretation of its rules and regulations is warranted because, having authored the promulgated text and exercised its legislatively delegated authority in interpreting it, the agency is best positioned to accurately describe the intent and construction of its chosen language.

When an agency adopts a construction which is then followed for “a long period of time,” such interpretation “is entitled to great weight and may not be ignored”. Further, when set forth in official statements, an agency’s consistent interpretation reflects an enduring body of informed administrative analysis, and provides a reviewing court with the agency’s interpretive position, as well as a measure of the enduring quality of the administrative judgment. The Court had previously given weight to DOL’s opinion letters when deciding whether to defer both to DOL’s interpretation of its own regulations as well as the Labor Law.

The Court found no occasion to deviate from its well-settled law. Thus, if DOL’s interpretation of the Wage Order met deferential standard, the Court could not reject it. In making the determination, the Court gave its foremost consideration to DOL’s opinion letters and prior statements because they represented a long-standing articulation of its interpretation of the Wage Order, as applied to nonresidential 24-hour shift employees, including home health care aides. And DOL’s fair and studied consideration was grounded in its specialized knowledge and experience of both round-the-clock work assignments and the home health care industry.

DOL’s interpretation was not inconsistent with the plain text of the Wage Order, which required that an employee be paid the minimum wage for the time when they are “required to be available for work at a place prescribed by the employer.” That language required both presence and an availability during a time scheduled for actual work. Plaintiffs mistakenly argued, and the Appellate Division erroneously concluded, that once a worker is physically present at the designated work site, they are thus able to work if called upon and so are “available for work.” That interpretation ignored the entirety of the phrase and renders superfluous the regulation’s separate requirement that the employee be both “available for work” and be so available “at a place prescribed by the employer,” in violation of two fundamental rules of statutory construction that apply with equal force in the administrative regulatory text: words must be “harmonize[d]” and read together to avoid surplusage. Put another way, if plaintiffs were correct that the only meaning that may be ascribed to this language was physical presence in the patient’s home, then the Wage Order was internally redundant as it already conveyed that with the words “or required to be at a place prescribed by the employer.” By contrast, DOL gave meaning to the complete phrase by interpreting “available for work,” in the context of a 24-hour shift to exclude the hours when the employee is not working because the employee was on a scheduled sleep and meal break.

DOL’s interpretation also reflected the Commissioner’s interest in conforming state and federal guidance on the proper calculation of compensable hours. Interpreting the Wage Order to exclude sleep and eating breaks in a 24-hour shift, on the presumption that the employer will in fact structure the work assignment to provide such time for a home health care aide, harmonized with the federal approach. It was neither unreasonable nor irrational for DOL to interpret its Wage Order in a manner that reduced administrative burdens, such as dual-sovereign reporting and wage payment requirements, and also has the added benefit of avoiding intergovernmental conflict.

Judge Garcia dissented and was joined by Judge Foley:

The Wage Order mandated minimum wage compensation whenever an employee was “available for work at a place prescribed by the employer.” The Wage Order contained only one exception—applicable only to residential employees—permitting employers to deduct certain hours’ of pay that would otherwise be compensable.

Plaintiffs were non-residential home health care aides who worked 24-hour shifts. During each shift, home health care aides are required to be present in the patient’s home for the full 24-hour period. They assisted with a variety of tasks integral to a patient’s daily functioning: “cooking, feeding, bathing, housework, using the restroom, and changing diapers.” According to plaintiffs’ allegations, home health care aides routinely did not receive meal breaks or adequate time for uninterrupted sleep, as their patients required assistance throughout the shift. As one employer’s orientation manual stated: “Patients are never to be left alone!” Plaintiffs further alleged that defendants failed to record when (or even whether) plaintiffs took sleep and meal breaks, making it impossible to reconstruct their actual hours of work.

All agreed that the Wage Order applied to plaintiffs in this case, and that plaintiffs did not fall within the Wage Order’s “residential employee” exception. Though home health care aides were nowhere excepted from minimum wage requirements, DOL nonetheless contended that the Wage Order should be interpreted to exclude eleven hours of each plaintiff’s work day: eight hours for “sleep time” and three hours for “meal time.” Specifically, DOL argued that the phrase “available for work at a place prescribed by the employer” imposed two distinct requirements—”available for work” and “at a place prescribed by the employer”—such that physical presence on the premises was, by itself, inadequate for an employee to be deemed “available for work.” In other words, DOL contended that, for non-residential employees like plaintiffs, the Wage Order should be interpreted to require both “presence and an availability during a time scheduled for actual work.” Applying that interpretation, DOL asserted that home health care aides were not technically “available for work” during “sleep time” and “meal time,” and therefore they need not be paid for those periods.

The dissent asserted that “DOL (and the majority) cannot be correct that plaintiffs’ sleep time may be excluded from their wages.” Under the Wage Order’s single exception—not applicable to plaintiffs — residential employees’ “sleeping hours” are expressly excluded from the time they are considered “available for work,” thereby allowing employers to deduct those hours’ of pay. By providing that, for residential employees, sleep hours do not constitute time the employee is “available for work,” the exception signifies that, for all other employees, sleep hours do constitute time they are “available for work”—and, accordingly, must be paid. Put differently, because residential employees’ sleep hours were specifically excluded from compensable time, it must follow that sleep hours would otherwise constitute time for which the employee must be compensated; if sleep time did not fall within “available for work” time, there would be no need to expressly exclude it. Accordingly, while the “available for work” requirement might demand more than physical presence—for instance, prompt readiness or accessibility—it cannot exclude “sleeping hours” for non-residential employees.

Under the plain terms of the Wage Order, for non-residential employees like plaintiffs—ho remained consistently “available for work,” even during sleeping hours—sleep time cannot be deducted from their pay. DOL’s contrary reading was expressly belied by the text of the regulation, and therefore warranted no deference.

Judge Garcia also disagreed with the majority’s rendition of DOL’s history of interpreting the Wage Order.  His dissent pointed out that the DOL’s position shifted several times over the years.

Under the guise of deference, according to the dissent, the majority adopted a construction of the Wage Order that ran contrary to the regulation’s text. Deference was unwarranted, however, where an agency’s interpretation was “irrational or unreasonable” or, in other words, unsupported by the regulation’s plain text.

Matter of Larchmont Pancake House v. Board of Assessors
2019 NY Slip Op 02441
Decided on April 2, 2019

Was petitioner qualified, as a non-owner, to seek administrative review of an assessment and was petitioner an “aggrieved party” with standing to maintain a tax certiorari proceeding. Answer: The Court of Appeals (5 Judges to 2) held that petitioner was not an aggrieved party within the meaning of RPTL article 7 and, accordingly, that petitioner lacked standing to maintain the proceeding.

The Real Property Tax Law sets out a tiered scheme for the review of property tax assessments. Initially, a complainant who is dissatisfied with a property assessment may seek administrative review by filing a grievance complaint with the assessor or the board of assessment review. RPTL section 524 provides that “a complaint with respect to an assessment . . . must be made by the person whose property is assessed, or by some person authorized in writing by the complainant or his officer or agent to make such a statement who has knowledge of the facts stated therein.”

Once a grievance complaint has been properly filed and the board of assessment review has made a determination, any “aggrieved party” may seek judicial review of the assessment pursuant to RPTL article 7. In order to maintain an article 7 tax certiorari proceeding, the aggrieved party must allege in its petition that “a complaint was made in due time to the proper officers to correct such assessment.” In other words, the proper filing of an administrative grievance pursuant to RPTL article 5, is a condition precedent to judicial review pursuant to RPTL article 7.

Four tax certiorari proceedings challenged annual tax assessments on real property located in the Town of Mamaroneck. Petitioner, the Larchmont Pancake House, is a family-owned corporation that operates an International House of Pancakes franchise on that property. The corporation was formed by Frank and Susan Carfora. The Carforas owned the real property together until Frank’s death, when Susan became the sole owner. Upon Susan’s death in October 2009, the property was transferred to a revocable trust pursuant to the terms of Susan’s will.

In June 2013, the property was transferred to Susan’s daughters, Irene Corbin and Portia DeGast, pursuant to the terms of the Carfora Trust. In the interim, petitioner continued to operate the restaurant on the property and to pay all of the operating costs, including the real estate taxes.

In the tax years 2010, 2011, 2012, and 2013, petitioner timely filed administrative grievance complaints, challenging the real property assessments for each of those years. Each complaint attached an authorization signed by Portia DeGast in her capacity as the president or owner of the Larchmont Pancake House. The board of assessment review confirmed the tax assessments, and petitioner thereafter commenced tax certiorari proceedings — a separate one for each year — pursuant to RPTL article 7. The Board of Assessors, the Assessor of the Town of Mamaroneck, and the Board of Assessment Review moved to dismiss the petitions, arguing that Supreme Court lacked subject matter jurisdiction because petitioner was not the owner of the property and petitioner lacked standing to challenge the tax assessments.

Supreme Court denied the motion to dismiss the petition in each proceeding. The Court first rejected the argument that petitioner failed to comply with a “precondition of the assessment challenge” provided by RPTL 524. Even though the petition was “not signed by the owner of the property,” the Court declined to “hang the decision on that simplistic peg,” noting that Portia DeGast “was one of the beneficiaries of a Trust which owned the property.” The Court also rejected respondents’ standing argument, holding that “Portia DeGast was an aggrieved party with the necessary standing” to institute the judicial proceeding.

The Appellate Division unanimously reversed and granted the motions to dismiss. The Court agreed that petitioner had standing as an “aggrieved party” for purposes of RPTL article 7 — reasoning that the tax assessments had a “direct adverse effect” on petitioner’s pecuniary interests — but determined that Supreme Court nonetheless “lacked subject matter jurisdiction to review the assessments.” The Court noted that “the filing of a grievance complaint” is a “condition precedent and jurisdictional prerequisite to obtaining judicial review” and, pursuant to RPTL article 5, the “property owner” must “file the complaint or grievance to obtain administrative review of a tax assessment.” In this case, petitioner “never owned the subject property” and, consequently, the Court determined that petitioner was not authorized to file the grievance complaint. Accordingly, the Court held that petitioner “failed to satisfy a condition precedent to the filing of the petitions” and therefore Supreme Court “should have granted [respondents’] motion[] to dismiss the petition in each proceeding.”

A taxpayer is aggrieved under article 7 where the tax assessment has a “direct adverse effect on the challenger’s pecuniary interest.” The quintessential aggrieved party under RPTL article 7 is a taxpaying owner of real property. Besides the property owner, the lessee of an undivided assessment unit may be aggrieved by a tax assessment “if legally bound by the lease to pay the entire assessment on behalf of the owner at the time it is laid.”

Here, the parties agreed that, during the relevant years, petitioner was not the owner of the property, nor was petitioner legally bound to pay the real property taxes. Petitioner contended, however, that the tax assessments had a direct impact on its pecuniary interest sufficient to render it “aggrieved” within the meaning of RPTL article 7.  Petitioner was the sole occupant of the property — not a partial lessee — and, during the relevant years, petitioner paid the entirety of the real property taxes directly to the taxing authority — not merely a pro rata share. But the majority held that the critical fact remained: petitioner was not “legally responsible” for paying the undivided tax liability.

Like any taxpaying tenant, petitioner was not immune from the impact of an increased tax obligation. That burden may be sizeable, particularly in the case of a longstanding occupant. But like any tenant — long-term or not — petitioner could have ceased paying the property taxes at any time without incurring any direct legal consequence to the taxing authority or the property owner. Instead, it was the property owner — the Carfora Trust — that risked loss of the property if the taxes were not paid. For those reasons, while “paying taxes always has a direct adverse effect on a pecuniary interest,” that alone was not enough in the majority’s view. Accordingly, in the absence of a direct contractual obligation, the assessment’s remote and consequential impact on petitioner was inadequate to confer standing.

WILSON, J. joined by RIVERA, J. (dissenting):

Real Property Tax Law 704(1) provides, in relevant part, that “any person claiming to be aggrieved by any assessment of real property upon any assessment roll” may seek judicial review of that assessment. The majority holds that a person who, pursuant to a longstanding arrangement, pays 100% of the property taxes on a piece of land, cannot “claim[] to be aggrieved” even by the improper inflation of the property taxes they pay.

That conclusion is as wrong as it sounds. Worse still, the mistake relied on to divest these aggrieved taxpayers of their right to judicial review was purely clerical: hardworking pancake proprietors, following their mother’s death, listed the name of their business instead of the name of the trust that temporarily held legal (but not equitable) title to the land on which their business sat. The trust filed an affidavit saying it would have approved of the tax proceedings when they were filed, and executed authorizations of the proceedings once the problem was brought to its attention. And the Town knew all along who owned the property and did not see fit to mention it until four years had passed. The claimed error was harmless, yet the Court dismissed the proceedings anyway.

For almost a century, the Court of Appeals followed the rule that courts should disregard errors like this, so that taxpayers can vindicate their rights to an accurate and equitable property tax assessment. Putting the wrong name on a tax assessment challenge is the kind of “technicality” the courts should disregard if no one is prejudiced and the party in whose name the proceeding should have been brought consents. And the Legislature has repeatedly directed the courts to ignore defects in petitions, complaints, and pleadings “if a substantial right of a party is not prejudiced.” These provisions embody “an enlightened system of civil procedure and eschews the elevation of form over substance.”

“The majority abandoned the rule of lenity and renders CPLR 3026 a Cassandra. Relying on hyper technicalities to close the courthouse doors to aggrieved taxpayers undermines the Constitutional mandate that tax assessments be neither inaccurate nor inequitable, replacing the Legislature’s liberal scheme for challenging local government decisions with a new, gloomier rule: you can’t fight City Hall.”