This Employment Law Spotlight blog post highlights important changes to New York's wage and hour laws covering private employers in the hotel and restaurant industries, not including resort hotels. These changes are already in effect and require employers to, among other things, update their employment posters and other documentation.
A. Increased Minimum Wage for Non-Exempt Employees
Nonexempt employees are those who are not exempt from the minimum wage and overtime requirements of federal and state wage and hour laws. Nonexempt employees make up the majority of the hospitality industry's workforce. For example, servers, hosts, bartenders, runners, bussers, barbacks, and cooks are nonexempt employees.
On December 31, 2014, New York's minimum wage increased from $8.00 per hour to $8.75 per hour.1 Therefore, employers must pay all nonexempt, non-tipped employees at least $8.75 per hour. For tipped employees, employers may pay a lower, tipped minimum wage of either $5.00 or $5.65 per hour depending on the employee's particular duties, so long as the employer satisfies certain requirements, as discussed below.
B. Increased Tip Credit
A tipped employee is an employee who regularly receives more than $30 per month in tips. Like any other nonexempt employee, a tipped employee must earn at least $8.75 per hour. However, unlike other nonexempt employees, a tipped employee has two sources of income that count towards the minimum wage for his or her job—the employer and the customers. Tips paid by customers can be counted towards the minimum wage as a "tip credit." The tip credit is subtracted from the minimum wage, resulting in a lower hourly wage for tipped employees ("tipped wage"). The tipped wage is the minimum amount that employers are permitted to pay tipped employees. 2
Recent legislative changes increased the tip credit that employers may take against the wages of tipped employees. The amount of tip credit permitted depends on the employee's position. For food service workers (employees primarily engaged in serving food or beverages who regularly receive tips e.g.wait staff, bartenders, captains, bussers), the maximum tip credit is $3.75 per hour. For service employees (non-food service workers e.g.coat check attendants, bathroom attendants), the maximum tip credit is $3.10 per hour. The increased tip credit coincides with the increased minimum wage; therefore, hospitality industry employers may continue to pay food service workers a tipped wage of $5.00 per hour and service employees a tipped wage of $5.65 per hour.
C. Increased Overtime Rates for Tipped Employees
Employers must pay overtime to all nonexempt employees (including tipped employees) for all hours worked in excess of forty (40) in a workweek. New York's increased minimum wage and tip credit have increased the overtime rate for tipped employees. A tipped employee's overtime rate is calculated by multiplying the employee's regular rate of pay by 1.5 and then subtracting the tip credit. The resulting amount is the rate that must be paid to the tipped employee for all hours worked over forty (40) in a workweek. For example, the minimum overtime rate for food service workers is now $9.38, calculated by multiplying the new minimum hourly rate of $8.75 by 1.5 and deducting the new tip credit of $3.75 for such employees. Likewise, the minimum overtime rate for service employees is now $10.03, calculated by multiplying the new minimum hourly rate of $8.75 by 1.5 and deducting the new tip credit of $3.10 for such employees.
D. Increased Spread of Hours Pay
New York's increased minimum wage also increased the spread of hours pay rate to $8.75. The spread of hours is the length of time between the beginning and end of an employee's workday. This includes the time worked, time off for meals, and intervals off duty. For example, if an employee works from 1:00 p.m. to 4:00 p.m. and 6:00 p.m. to 12:00 a.m., he or she only worked nine (9) hours, but there is an eleven (11) hour spread.
On each day when an employee's spread of hours exceeds ten (10), the employer must pay the employee one additional hour of pay at the minimum wage rate ($8.75), regardless of the employee's regular rate of pay.3
E. Increased Uniform Maintenance Pay
In the hospitality industry, employers must purchase or reimburse employees for required uniforms. Employers are also responsible for the costs associated with maintaining required uniforms. If an employer does not maintain employee uniforms, it must (unless it falls within the specific exemptions defined by applicable law4) provide uniform-maintenance pay, in addition to regular wages, to cover employee costs associated with cleaning their required uniforms.
Effective December 31, 2014, uniform maintenance pay increased as follows: from $9.95 to $10.90 per week for workweeks over 30 hours, from $7.85 to $8.60 per week for workweeks of more than 20 but not more than 30 hours, and from $4.75 to $5.20 per week for workweeks of 20 hours or less.
F. Meal and Lodging Credit
Meals and/or lodging provided by a hospitality industry employer to an employee may be considered part of the wages paid to the employee, subject to applicable meal and lodging credit limitations. When an employer takes a meal and/or lodging credit against the wages of an employee, the employer may not charge the employee any additional money for the meal(s) and/or lodging.
Restaurants and all-year hotels may credit $2.50 per meal against the wages of food service workers and service employees. The credit for meals furnished to non-service employees increased from $2.75 to $3.00 per meal on December 31, 2014.
Restaurants may credit the following against employee wages for lodging: $1.50 per day or $9.60 per week for food service workers; $1.75 per day or $11.30 per week for service employees; and $2.15 per day or $13.60 per week for non-service employees.
All-year hotels may credit the following against employee wages for lodging: $0.35 per hour for food service workers or service employees and $0.45 per hour for non-service employees.
G. Increased Minimum Salary for Exempt Employees
Exempt employees are exempt from the overtime requirements of federal and state wage and hour laws; therefore, such employees are not entitled to overtime pay. Exempt employees are classified as such if their job duties and responsibilities fit within the exemptions set forth under applicable law and they are paid on a salaried basis. In the hospitality industry, high-level management positions are the most common exempt positions, although not all managers are exempt, and some nonmanagement positions can be exempt, depending on the employee's duties.
On December 31, 2014, the minimum salary for an employee to qualify for the executive or administrative exemptions to overtime increased from $600 to $656.25 per week inclusive of board, lodging, or other allowance and facilities.
Footnotes
1 Effective December 31, 2015, New York's minimum wage will increase from $8.75 per hour to $9.00 per hour. Additionally, on January 18, 2015, Governor Cuomo announced that he plans to submit a proposal to raise the minimum wage to $11.50 per hour in New York City and $10.50 per hour throughout New York State by the end of 2016.
2 An employer may only take a tip credit against an employee's wages if the employee earns sufficient tips to average no less than $8.75 per hour for all hours worked over the course of a workweek and if the employee received proper written notice at or before the time of hiring of the tip credit.
3 Spread of hours pay cannot be offset by any tip, meal, or lodging credit. In addition, any "hours" paid to comply with the spread of hours requirement are not counted as hours worked for any other purpose, including whether overtime is required or in calculating an employee's regular rate of pay.
4 Employers are not required to provide uniform-maintenance pay if: the employer establishes a dress code rather than requiring a uniform; the employer provides a sufficient number of wash-and-wear uniforms consistent with the average number of days per week worked by the employee; or launders the employees' uniforms themselves and informs employees of its laundering service in writing.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
