On April 4, 2015, New York Governor Andrew Cuomo executed sweeping legislation as part of the 2016-17 state budget, implementing a complicated and staggered set of minimum wage increases, and creating a system of paid family leave benefits.1 This Insight describes the schedule and details of the minimum wage increases to be implemented commencing December 31, 2016, and continuing each year until 2021.

Schedule of Minimum Wage Increases

The legislation2 will gradually raise the minimum wage to $15.00 an hour under different schedules in three state regions: 1) New York City; 2) “downstate,” which includes Nassau, Suffolk and Westchester counties; and 3) the remainder of New York State (“upstate”).  The legislation also sets a different schedule of increases for New York City businesses with 10 or fewer employees.

The current minimum wage in New York is $9.00 per hour, while fast food workers in chain restaurants are currently entitled to a minimum wage of $10.50 in New York City and $9.75 outside of New York City. 

The schedule of minimum wage increases is as follows:

Click here to view table.

After the increase to $12.50 per hour on December 31, 2020, the minimum wage for upstate workers will continue to increase according to an indexed schedule the Director of the Division of Budget, in consultation with the New York Department of Labor, will set, until the minimum wage reaches $15.00 per hour.

Safety Valve in the Event of Economic Decline

The legislation provides a procedure to slow the scheduled minimum wage increases in the event of a slowdown in the New York economy. Commencing in 2019, the Director of the Division of Budget will conduct an analysis of the economy and the effect the increased minimum wage will have in each of the state’s three wage regions to determine whether a temporary suspension of the scheduled increases is necessary. 

Schedule for Fast Food Workers

A phased-in schedule of minimum wages for workers in “fast food establishments” took effect beginning on December 31, 2015, and remains unchanged by the new minimum wage legislation signed on April 4, 2016.3  Effective December 31, 2015, the minimum wage for fast food workers in New York City is $10.50 per hour, and the minimum wage for fast food workers in the rest of the state is $9.75.  Minimum wages for fast food workers will increase under the following schedule.4

Click here to view table.

What About Tipped Employees?

Tipped employees in New York State received a substantial increase in their cash base hourly rate effective December 31, 2015. Prior to December 31, 2015, the minimum wage for tipped employees in the food service industry was $5.00 per hour with a maximum credit for tips of $3.75 per hour.  For service employees, the cash minimum was $5.65 per hour with a maximum tip credit of $3.10.  Tipped employees in resort hotels received a cash minimum of $4.90 per hour with a maximum tip credit of $3.85.5  Effective December 31, 2015, the cash wage for tipped employees in all three categories in the hospitality industry is $7.50 and the maximum tip credit is $1.50.6

How will the new minimum wage increases apply to tipped employees?  Under the new legislation, the new minimum wage for tipped employees is two thirds of the applicable minimum wage, rounded to the nearest five cents, or $7.50, whichever is higher.7  In the absence of revised wage orders issued by the New York Department of Labor, the minimum cash wage for tipped employees prior to their receipt of tips will increase under the following schedule:

Click here to view table.

Minimum cash base wages for tipped employees will therefore reach $10.00 per hour in New York City, Long Island and Westchester, with a $5.00 per hour tip allowance permitted, provided tips average at least $5.00 per hour, to reach a total minimum wage of $15.00 per hour.  Minimum cash wages for the rest of the state would be $8.35 per hour with a $4.15 per hour tip allowance, for a total minimum wage of $12.50, pending the results of the Division of Budget’s analysis of the effects of the minimum wage increases.

Recommendations

The $2.00 an hour increase to the minimum wage in New York City represents a 22% raise for most hourly New York City workers earning minimum wage.  Indeed, even for relatively small New York City employers (those with as few as 11 employees), the minimum wage will be increasing by two-thirds in a period of just three years.  Such large increases will have an effect on thousands of employees who are currently paid above the minimum, as well as on employees who are paid at or near the minimum.  Such large increases will not only overtake the wages of employees already paid as much as $6 per hour above the existing minimum; they will have a ripple effect on the wages of supervisory employees and other hourly employees who command rates above minimum wage.  Thus, employers employing workers at or near the minimum wage are not the only ones who should plan for the significant wage increases that become effective December 31, 2016, and each subsequent December 31.  Because of the extended lead time granted before these increases take effect, the New York Department of Labor is unlikely to grant any “grace period” before enforcing these increases. Employers should consult employment counsel to properly plan compliance with the scheduled increases.