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New wage order means pay changes for hospitality employers

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in Compensation and Benefits

by Subhash Viswanathan, Esq.

New York employers in the hotel and restaurant industry have a new pay rule to work with, changing how tip income is handled and tweaking other details that affect how much pay workers take home.

The New York State Department of Labor’s Hospitality Industry Wage Order became effective on Jan. 1. A grace period was in effect until Feb. 28, but employers are expected to be fully compliant by March 1.

Note: Despite the grace period, hospitality workers affected by the new order must be paid all additional wages owed to them by March 1. That means employers must retroactively calculate the additional pay going back to Jan. 1.

Employers covered by the wage order must post a notice regarding the implementation period and employees’ right to retroactive wages.

Here’s a summary of changes under the Hospitality Industry Wage Order:

Tip credit changes

Under the old Restaurant Industry Wage Order, employers had to pay food-service workers at least $4.65 per hour, as long as tips plus hourly wages equaled at least $7.25 per hour, the minimum wage.

Now food service workers must receive at least $5 per hour, as long as the amount of their tips added to their hourly wages equal at least $7.25 per hour.

In resort hotels, service employees may be paid a minimum of $4.90 per hour (up from $4.35) as long as weekly tips average at least $4.10 per hour.

Those who don’t work in resort hotels must receive at least $5.65 per hour (up from a minimum of $4.90), as long as tips plus hourly wages equal or exceed the minimum wage.

Employers must notify new hires that a tip credit will be taken. Similar notice must also be provided to current employees whose pay is affected by tip credit changes resulting from the new wage order.

If a tipped employee works in a non-tipped occupation for two hours or more in a day (or for more than 20% of a daily shift), tip credits aren’t allowed. Employers must pay them at least $7.25 per hour.

Tip pooling and tip sharing

Employers covered by the wage order may require directly tipped workers to share their tips with co-workers who help serve customers and may set the percentage amount that must be shared. Employers may also require workers to participate in a tip-pooling arrangement.

Only certain types of employees are eligible to receive shared tips or distributions from a tip pool. Those occupations include: waiters, counter workers who serve food and beverages, bus persons, bartenders, barbacks, food runners, captains who provide direct food service to customers and hosts who greet and seat guests.

Note: Employers must keep detailed tip-sharing or tip-pooling records for at least six years.

Call-in pay and spread of hours

The wage order requires employers to pay workers their “applicable wage rate” for at least three hours if called in for one shift, six hours if called in for two shifts and eight hours if called in for three shifts. The phrase “applicable wage rate” is defined as the employee’s regular or overtime rate of pay, whichever is applicable, minus any customary and usual tip credit.

Any employee who works more than 10 hours from the beginning to the end of a workday is entitled to an additional hour of pay at the basic minimum hourly wage rate, regardless of the employee’s regular rate of pay. Therefore, employers are no longer permitted to take a credit toward this “spread of hours” payment for wages paid to an employee in excess of the minimum wage for the other hours worked in the day.

Uniform maintenance allowance

The uniform maintenance allowance amounts remain the same with two exceptions.

Under the “wash and wear” exception, an employer is not required to provide any uniform maintenance allowance if the uniforms:

  • Are made of “wash and wear” materials
  • Can be washed and dried with other garments
  • Do not require ironing, dry cleaning, daily washing, commercial laundering or other special treatment
  • Are furnished in sufficient number for the average number of days per week an employee works.

Second, no uniform maintenance allowance is required if an employer offers in writing to launder the uniforms free of charge and the employee chooses not to use the employer’s laundry service.

Meal Credit

The amount of credit that an employer in the hospitality industry may take for providing an employee with a meal has been increased from $2.10 to $2.50 per meal.

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Author: Subhash Viswanathan represents and counsels employers in a variety of labor and employment matters. He is based in the Syracuse office of Bond, Schoeneck & King, PLLC. Contact him at (315) 218-8324 or sviswanathan@bsk.com.

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