On December 15, 2010, the New York State Department of Labor quietly adopted a major change to New York’s wage rules affecting the restaurant and hotel industries. The new regulation seeks to clarify existing wage orders by creating a single, more straightforward Hospitality Wage Order.
The Hospitality Wage Order’s effective date is January 1, 2011. In response to industry concerns about the practical hardship to payroll and bookkeeping practices, the New York Department of Labor will permit employers until March 1, 2011 to come into compliance. However, any additional wages due under the regulation must be paid retroactively.
The full text of the regulation, contained in 12 NYCRR 146, can be found here. Employers should also be aware that the New York State Department of Labor has provided a new poster that must be displayed in the workplace for businesses in the New York hospitality business.
Some of the key changes that affect payroll practices are as follows:
– Increased hourly wages for tipped employees
The regulation increases the required wages for some workers through the elimination of certain exceptions and tiered job definitions. The regulation imposes the following minimum hourly wages:
- For tipped food-service employees: $5 (from $4.65) with a tip credit of no more than $2.25;
- For service employees who earn tips: $5.65 (from $4.90) with a tip credit of no more than $1.60; and
- For employees working in resort hotels: $4.90 (from $4.35) with a tip credit of no more than $2.35.
The regulation emphasizes that hospitality employees must be paid overtime at a wage rate of 1½ times the employee’s regular rate for hours worked in excess of 40 hours in one workweek. This rule is consistent with existing New York law.
– Hourly pay rate is mandatory
Under the former rules, employers were permitted to pay New York hospitality employees on a piece rate, salary, or other basis provided that the wage rules are met on an hourly basis. The regulation specifically eliminates this discretion and requires that all hospitality employees be paid on an hourly basis.
– Notification of tip credits
As under the former rules, the regulation provides that an employer may issue a credit toward the basic minimum hourly rate if the service employee or food service worker receives tips. However, employers must now notify employees in writing of any tip credits that are taken against the minimum wage, consistent with federal law.
– “Spread of hours”
As under the former rules, an employee who works more than 10 hours in a single day is entitled to one extra hour of pay at minimum wage. However, this rule now applies to all employees working in restaurants and all-year hotels, regardless of their wages. Further, the additional hour of wages may not be considered part of overtime pay, and the extra hour of wages may not be offset by a meal credit.
– Written notice of pay upon hire and rate change
The regulation requires that employees be provided with written notice of wages upon hire and prior to any change in wages. As under former rules, employers are required to keep a written acknowledgement on file for six years.
In addition, the Hospitality Wage Order modifies some other practices in New York’s hospitality industry. For instance, both “tip sharing” and “tip pooling” are now permitted, consistent with federal law. The regulation creates an exception to the requirement that employers provide payment for required uniform maintenance if the uniforms fall within a defined category of “wash and wear” material. The regulation also explicitly permits employers to deduct credit card service fees from tips on a pro rata basis.