Department of Labor Implements Hospitality Industry Wage Order

January 19, 2011

By: Subhash Viswanathan

The New York State Department of Labor’s Hospitality Industry Wage Order, which is intended to combine and replace the Wage Orders formerly applicable to the Restaurant Industry and Hotel Industry, became effective on January 1, 2011. The Department of Labor has issued a notice to employers that it will exercise discretion with regard to enforcement until February 28, 2011, in order to allow employers sufficient time to come into compliance, but expects that employees covered by the Wage Order will be paid any additional wages owed to them by March 1, 2011 or the next regularly scheduled pay day after March 1, 2011. The additional wages must be computed retroactively to January 1, 2011. Employers covered by the Wage Order are required to post a notice to employees regarding the implementation period and their right to retroactive payment of wages.

The Wage Order makes several changes to the rules governing the payment of wages to employees in restaurants and hotels. Some of the significant changes are described below.
 

Tip Credit

Under the former Restaurant Industry Wage Order, employers were required to pay food service workers at least $4.65 per hour, as long as the tips received by those workers added to their hourly wages equaled or exceeded the minimum wage of $7.25 per hour. Under the new Hospitality Industry Wage Order, food service workers must receive an hourly wage of at least $5.00 per hour, as long as the amount of their tips added to their hourly wages is sufficient to equal or exceed the minimum wage. Service employees who do not work in resort hotels must be paid at least $5.65 per hour (up from a minimum of $4.90), as long as the amount of their tips added to their hourly wages is sufficient to equal or exceed the minimum wage. In resort hotels, service employees may be paid a minimum of $4.90 per hour (up from $4.35) as long as the weekly average of their tips is at least $4.10 per hour.

In order to pay the reduced minimum wage to a tipped employee, employers must notify the employee of any tip credit that will be taken as part of its new hire notice. If any changes are made to the employee’s hourly wage, a new notice must be provided containing the same information.

If a tipped employee works in a non-tipped occupation for two hours or more in a day, or for more than 20% of his or her shift during a day, the employer is not entitled to take any tip credit for any hours worked during the day, and must pay at least the full minimum wage of $7.25 per hour for all hours worked.

Tip Pooling and Tip Sharing

Employers covered by the Wage Order may require directly tipped food service workers to share their tips with other food service workers who participated in providing the service to customers and may set the percentage to be given to each occupation. Employers may also require food service 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: (1) wait staff; (2) counter personnel who serve food and beverages; (3) bus persons; (4) bartenders; (5) service bartenders; (6) barbacks; (7) food runners; (8) captains who provide direct food service to customers; and (9) hosts who greet and seat guests. Employers are required to keep detailed records relating to tip sharing or tip pooling arrangements for at least six years.

Call-In Pay

The Wage Order provides that an employee who reports for duty by request or permission of the employer must be paid at his or her “applicable wage rate” for at least three hours if called in for one shift, six hours if called in for two shifts, or 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. This is a change from the former Wage Orders, which required payment at the “applicable minimum wage rate.”

Spread of Hours

Under the Wage Order, any employee whose spread of hours from the beginning to the end of the work day exceeds ten 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 a 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.

Uniforms

The uniform maintenance allowance amounts remain the same under the Wage Order, but two exceptions have been created. First, under the “wash and wear” exception, an employer is not required to provide any uniform maintenance allowance if the uniforms: (1) are made of “wash and wear” materials; (2) can be washed and dried with other garments; (3) do not require ironing, dry cleaning, daily washing, commercial laundering, or other special treatment; and (4) are furnished in sufficient number consistent with the average number of days per week worked by the employee. Second, an employer is not required to provide any uniform maintenance allowance if it informs the employee in writing that it will 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.