The New York State Department of Labor adopted new rules for the hospitality and restaurant industries, entitled the Hospitality Industry Wage Order. The new rules went into effect on January 1, 2011. To the extent that employers have not been able to implement these changes by the effective date, the DOL has given employers until February 28, 2011 to make necessary payroll system changes needed to come into compliance with the rule's requirements. Nonetheless, as of March 1, 2011, or their next regularly scheduled pay day following March 1, 2011, all employees covered by this rule must be paid any additional wages owed to them on account of this rule, computed retroactively to January 1, 2011. If the employer has been unable to implement the changes by January 1, 2011, the employer must post a Labor Department notice in its establishment viewable by all employees.
The new rules consolidate previously separate rules for the hospitality industry with the restaurant industry.1 The new rules make some significant changes from previous Department of Labor rules, including reducing the maximum tip credit for certain tipped employees, defining "tip pooling" and "tip sharing", with the hope of clarifying these often arcane rules, and requiring written notice to employees of the employer's use of the tip credit. Some rules that were already in effect remain in place, including, for example, the requirement that employers pay the basic minimum wage of $7.25/hour and maintain appropriate records for six years.
The following is a summary of some of the new rules:
- The basic minimum hourly rate for employees remains the same. They are to be paid at least the basic minimum hourly rate of $7.25/hour.
- However, food service workers' (or tipped employees) maximum tip credit is changed.2 The existing $4.65/hour minimum wage (with a $2.60/hour maximum tip credit) is changed, effective January 1, 2011, to $5.00/hour minimum wage (with a $2.25/hour maximum tip credit) with a total of at least $7.25/hour.
- The new rules define "food service worker" as any employee who is primarily engaged in the serving of food or beverages to guests, patrons or customers in the hospitality industry, including, but not limited to, wait staff, bartenders, captains and bussing personnel; and those who regularly receives tips from guests, patrons or customers. The Department of Labor will look at an employee's duties, rather than his or her title, when determining whether an employee is a "food service worker."
- An employer may take a credit toward the minimum wage if the food service worker receives enough tips and the employee has been notified of the tip credit.
- "Tip pooling" and "tip sharing" terms are now defined, as well as the circumstances under which each is permissible, the degree to which the employer may require tip pooling and sharing, and the records the employer is required to keep when operating tip pooling or sharing.
- The types of employees eligible to receive shared tips, or to receive distributions from a tip pool, is based upon duties and not titles. Eligible employees must perform, or assist in performing, personal service to patrons at a level that is a principal and regular part of their duties and not merely occasional or incidental. Examples include (a) wait staff; (b) counter personnel who serve food or beverages to customers; (c) bus persons; (d) bartenders; (e) service bartenders; (f) barbacks; (g) food runners; (h) captains who provide direct food service to customers; and (i) hosts who greet and seat guests. The percentage amount of tips shared by directly tipped employees with indirectly tipped employees may not be greater than is reasonable and customary.
- Tip Sharing is the practice by which a directly tipped employee gives a portion of his or her tips to another employee who participated in providing service to customers and keeps the balance. An employer may require directly tipped food service workers to share their tips with other food service workers who participated in providing service to customers and may set the percentage to be given to each occupation. However, employees must handle the transaction themselves.
- Tip pooling is the practice by which the tip earnings of directly tipped employees are intermingled in a common pool and then redistributed among directly and indirectly tipped employees. An employer may require food service workers to participate in a tip pool and may set the percentage to be distributed to each occupation from the pool. Only food service workers may receive distributions from the tip pool.
- Written notice of pay rates and tip credit: Prior to the start of employment, an employer shall give each employee written notice of the employee's regular hourly pay rate, overtime hourly pay rate, the amount of tip credit, if any, to be taken from the basic minimum hourly rate, and the regular payday. The notice shall also state that extra pay is required if tips are insufficient to bring the employee up to the basic minimum hourly rate. The notice shall be in English and the new employee's primary language, if that language is provided in a notice on the Department of Labor's website. A notice is also required prior to any change in the employee's hourly rate. An acknowledgement of receipt is to be signed by an employee and it shall be kept on file for six years. The rules also provide an example of a form of notice that employers may use.
- Employer records: An employer shall establish, maintain and preserve for at least six years weekly payroll records, which shall show for each employee:
- name and address;
- social security number or other employee identification number;
- occupational classification;
- the number of hours worked daily and weekly, including the time of arrival and departure for each employee working a split shift or spread of hours exceeding 10;
- regular and overtime hourly wage rates;
- the amount of gross wages;
- deductions from gross wages;
- the amount of net wages;
- tip credits, if any, claimed as part of the minimum wage;
- meal and lodging credits, if any, claimed as part of wages;
- money paid in cash; and
- student classification.
Additionally, employers who operate a tip sharing or tip pooling system must establish, maintain, and preserve the daily records for at least six years. The records include a daily log of the tips collected by each employee on each shift, a list of employees that the employer deems eligible to receive tips, the shares of tips that each occupation is scheduled to receive, and the amount in tips that each employee receives.
- Statements to employee: Every employer shall provide to each employee a statement, commonly referred to as a pay stub, with every payment of wages. The pay stub must list hours worked, rates paid, gross wages, credits claimed, including tip credits if any, deductions and net wages.
- Postings: Employers are required to post in a conspicuous place notices issued by the Department of Labor about wage and hour laws, tips appropriations and other labor laws.
- Overtime hourly rates: An employer shall pay an employee for overtime at a wage rate of 1½ times the employee's regular rate for hours worked in excess of 40 hours in one workweek. When an employer is taking a tip credit, the overtime rate shall be the employee's regular rate of pay before subtracting any tip credit, multiplied by 1½, minus the tip credit. It is a violation of the overtime requirement for an employer to subtract the tip credit first and then multiply the reduced rate by one and one half.
- Spread of hours greater than 10 hours: On each day on which the spread of hours exceeds 10 hours, an employee shall receive one additional hour of pay at the basic minimum hourly rate. The additional hour of pay shall not be offset by any credits for meals or lodging provided to the employee. The additional hour of pay is not a payment for time worked or work performed and need not be included in the regular rate for the purpose of calculating overtime pay.
- Split shift: A split shift is a schedule of daily hours in which the working hours required or permitted are not consecutive. Interruption of working hours for a meal period of one hour or less does not constitute a split shift. An employee working a split shift exceeding 10 hours a day shall receive one additional hour of pay at the basic minimum hourly rate. A credit for more than two meals shall not be permitted for any other employee on any day, but a credit of one meal per shift may be permitted for an employee working on a split shift.
- Tips charged on credit cards: When tips are charged on credit cards, an employer is not required to pay the employee's pro-rata share of the service charge taken by the credit card company for the processing of the tip. The employer must return to the employee the full amount of the tip charged on the credit card, minus the pro-rata portion of the tip taken by the credit card company.
- Uniform related costs: Where an employer does not maintain required uniforms, the employer shall pay the employee uniform maintenance pay in addition to the employee's agreed rate of pay. However, an employer will not be required to pay the uniform maintenance pay, where required uniforms (1) are made of "wash and wear" materials, (2) may be routinely washed and dried with other personal garments, (3) do not require ironing, dry cleaning, daily washing, commercial laundering, or other special treatment, and (4) are furnished to the employee in sufficient number, or the employee is reimbursed by the employer for the purchase of a sufficient number of uniforms, consistent with the average number of days per week worked by the employee.
- Deductions and expenses: Employers may not make any deductions from wages except for credits authorized by the proposed rule. As examples of a prohibited deduction, the current rule lists the following: (1) deductions for spoilage or breakage; (2) deductions because of non-payment by a customer; (3) deductions for cash shortages or losses; and (4) fines or penalties for lateness, misconduct, or quitting by an employee without notice.
The above information is only a summary of the Department of Labor's new rules.
1 The new rules combine the wage orders for the restaurant and hotel industries (12 NYCRR §§ 137 and 138) into a single new "Minimum Wage Order for the Hospitality Industry."
The new rules consist of three subparts: § 146-1 Minimum Wage Rates; § 146-2 Regulations (including regulations on record-keeping, notice and posting requirements, deductions and tip sharing/pooling); and § 146-3 Definitions.
2 The new rules eliminate a separate tip credit for housekeeping employees in resort hotels, consolidating them with other tipped service employees. Moreover, the rules retain several special provisions for resort hotels only, namely a higher tip credit for non-food service employees and higher meal and lodging credits for all employees.