The New York State Department of Labor recently issued a proposed rule which would combine the current wage orders for the restaurant and hotel industries to form a single Minimum Wage Order for the Hospitality Industry. If adopted, the Wage Order would affect requirements related to the minimum wage, tip credits and pooling, customer service charges, allowances, overtime calculations, and other common issues within the restaurant and hotel industries. Additionally, the Wage Order would provide helpful guidance for traditionally ambiguous wage issues such as the handling of service charges and the definition of an employee uniform for purposes of a laundry allowance. Highlights of the Wage Order include:

  • Minimum Wage (Effective January 1, 2011)
    • Food service workers would need to receive at least $5.00 per hour and no more than $2.25 per hour in tip credits; however, the total of tips they receive plus their hourly wages would need to amount to $7.25 per hour
    • Service employees (at non-resort hotels) would need to receive at least $5.65 per hour and no more than $1.60 per hour in tip credits; however, the total of tips they receive plus their hourly wages would need to amount to $7.25 per hour
    • Service employees (resort hotel employees) would need to receive at least $4.90 per hour and no more than $2.35 per hour in tip credits; however their weekly average for tips would need to be at least $4.10 per hour
  • Notifications to Employees and Customers
    • Prior to beginning employment, employers now would need to notify employees that they are taking a tip credit from their wages
    • Employers would need to notify employees of any changes to their hourly rate of pay
    • Employers would need to notify customers of any charge that is neither for food/beverage nor a gratuity to a service employee; for example, a banquet or special function charge
  • No More Set-Off of Wages Paid in Excess of Minimum Wage
    • Employers would need to pay an additional hour at the rate of minimum wage for each hour the employee works beyond 10 hours per day, regardless of whether the rate of pay for the first 10 hours is above the minimum wage
  • No More Salary for Non-Exempt Employees
    • Currently, a non-exempt employee can still be paid a salary so long as he/she is paid one and one-half times the regular rate of pay for hours worked beyond 40 hours during the week
    • If adopted, the Wage Order would require that all non-exempt workers (except commissioned salespersons) are paid on an hourly basis
  • Tip Pooling
    • Employers could require food service workers to join a tip pool
    • This would not apply to employees who do not provide direct food service to customers (however, a host/hostess who seats guests would be considered a direct food service employee and therefore eligible to participate in a tip pool)
  • Increased Guidance
    • Employers would be able to retain service charges if, and only if, they clearly explain to customers that such charges are not distributed to service employees
    • The Wage Order would exclude from the definition of “uniform” any clothing that may be worn as part of an employee’s wardrobe outside of work
    • Employers would not need to reimburse employees for the laundry expenses of any uniform clothing that can be washed with the employee’s non-uniform clothing; for example, a uniform that does not require dry cleaning

The new Wage Order signifies the New York State Department of Labor’s attempt to simplify the wage and hour rules for the restaurant and hotel industries while stepping up its enforcement of overtime and deduction violations, particularly with respect to non-exempt employees who are currently paid a salary as opposed to an hourly wage. Of course, these highlighted changes are only a portion of the changes that would come into effect in the event the Wage Order is adopted in its entirety.