Executive Summary: On July 22, 2015, the New York State Department of Labor's (NYSDOL) Wage Board voted to recommend a 171 percent increase in the minimum wage for fast food workers in New York City (NYC), from the current hourly rate of $8.75 to $15.00 by 2018. If the Wage Board's recommendation becomes law (it would go into effect December 31, 2015 if approved by Commissioner of Labor Musolino), the minimum wage for fast food workers would first jump to $10.50 by year's end, increasing $1.50 annually thereafter until reaching $15 per hour by July 1, 2021, in all of New York State. The Department of Labor's press release indicates this decision may be made as early as Monday, July 27, 2015.

The proposed "phased increases" would be more gradual for fast food workers in New York State (NYS). Notably, the Wage Board treated NYC employees differently than NYS employees, due to (a) differences in the cost of living; and (b) the rapid expansion of the fast food industry in NYC. The table below demonstrates the difference in the proposed wage increases for NYC and NYS fast food workers:

Click here to view table.

This recommendation comes just six months after the Wage Board's proposal to decrease the tip credit, which we discussed at length in our February 4, 2015 Alert,The Diminishing Tip Credit: Another Reason it is becoming Harder to Comply with Wage & Hour Laws in New York.

Background

Governor Andrew Cuomo assembled the Wage Board last year to review low-wage workers' pay rates. Since then, the Wage Board has been aggressive in recommending first the diminishing tip credit and now greatly increased wages for fast food workers. Hospitality industry employers (e.g. restaurateurs, including fast food franchise owners and operators) should prepare for this increase in wage rates to become law by year's end. 

Potential Impact of the Proposed Increases

Regardless of speculation that such an increase in the minimum wage will only serve to incentivize automation of the fast food process and/or translate into price hikes at fast food restaurants, the reality for fast food employers is clear: employers need to prepare for the increased cost of doing business or ignore it at their peril.

The Wage Board's recommendation, if approved, will effectuate a significant increase in operation overhead for fast food employers as well as increased enforcement pressure from government agencies such as the US Department of Labor (USDOL), NYSDOL or the New York State Attorney General's Office (NYSAG).

Although their recommendation pertains to fast food workers, there is a very real and foreseeable threat that this wage increase is just the beginning: it may impact restaurants generally depending on its enforcement, then creep its way into retail, and possibly other service oriented industries. Under the Wage Board's current recommendations, a "Fast Food Establishment" is defined as follows: "where patrons order or select items and pay before eating and such items may be consumed on the premises, taken out, or delivered to the customer's location, which offers limited service, which is part of a chain (meaning a set of establishments which share a common brand), and which is one of 30 or more establishments nationally, including franchise locations." Rather than ignore or operate in denial of the far-reaching implications of this expansive definition of who constitutes a "Fast Food" employer, we recommend all employers evaluate their business and take a proactive, cost-benefit analysis approach.

The Bottom Line:

The current business and legal landscape means employers can no longer delay compliance review of their wage and hour practices. Business operators and owners may face severe consequences for non-compliance, including business closure, personal financial ruin, and possibly even jail time. We strongly recommend immediate reviews of record keeping policies and procedures, and encourage employers to consider implementing a periodic payroll audit protocol to ensure compliance with wage and hour laws.