The New York State Department of Labor has issued new wage regulations applicable to employees in the restaurant and hotel industry. The new Hospitality Wage Order, effective January 1, 2011, brings significant changes that both employers and employees in the restaurant industry should be aware of.
1. Increased Minimum Wage For Tipped Employees
The minimum wage for tipped food service employees will increase from $4.65 per hour to $5.00 per hour, while the tip credit will be reduced to $2.25 per hour. The total of tips received plus the base hourly rate must be equal to or exceed a minimum wage of $7.25 per hour.
2. Mandatory Tip Pooling
Under the new Hospitality Wage Order, directly tipped employees may mutually agree to pool their tips on a voluntary basis and to redistribute the tips among directly tipped employees and indirectly tipped employees who participate in providing the service. Alternatively, an employer may require its waitstaff to participate in a tip pool and may set the percentage to be distributed to each occupation from the tip pool. However, only food service workers may receive distributions from the tip pool.
3. Eligibility to Share in Tips
The Hospitality Wage Order clarifies that the eligibility of employees to receive shared tips, or to receive distributions from a tip pool, must be based upon duties, not titles. Eligible employees must perform, or assist in performing, personal services to patrons at a level that is a principal and regular part of their duties and is not merely occasional or incidental. Examples of eligible occupations include:
(2) Counter personnel who serve food or beverages to customers
(3) Bus persons
(5) Service bartenders
(7) Food runners
(8) Captains who provide direct food service to customers
(9) Hosts who greet and seat guests
Employers may not require directly tipped employees to contribute a greater percentage of their tips to indirectly tipped employees through tip sharing or tip pooling than is customary and reasonable.
4. Service Charges
The Hospitality Wage Order provides that there must be a rebuttable presumption that any charge in addition to charges for food, beverage, lodging, and other specified materials or services, including but not limited to any charge for “service” or “food service,” is a charge purported to be a gratuity. Under the New York State Labor Law, a charge which a restaurant claims to be a gratuity must be distributed in full as gratuities to the service employees or food service workers who provided the service.
A charge for the administration of a banquet, special function, or package deal must be clearly identified as such and customers must be notified that the charge is not a gratuity or tip. However, the employer has the burden of demonstrating, by clear and convincing evidence, that the notification was sufficient to ensure that a reasonable customer would understand that such charge was not a gratuity. Under the Hospitality Wage Order, adequate notification includes a statement in the contract or agreement with the customer, and on any menu and bill listing prices, that the administrative charge is for administration of the banquet, special function, or package deal, is not a gratuity, and will not be distributed as gratuities to the employees who provided service to the guests. The statements must use ordinary language which can be readily understood and appear in a font size similar to the surrounding text, but no smaller than a 12-point font.
5. Spread of Hours
On each day in which a restaurant worker’s spread of hours exceeds ten, he/she must receive one additional hour of pay at the basic minimum hourly rate of $7.25. The spread of hours is the length of the interval between the beginning and end of an employee’s workday. The spread of hours for any day includes working time plus time off for meals plus intervals off duty. Examples of spread of hours greater than 10 are:
(1) 7 AM – 10 AM, 7 PM – 10 PM = 6 hours worked but a 15 hour spread
(2) 11:30 AM – 3 PM, 4 PM – 10 PM = 9 ½ hours worked but a 10 ½ hour spread
The spread of hours requirement now applies to all employees in restaurants and all-year hotels who are non-exempt from the overtime requirement, regardless of a given employee’s regular rate of pay.
6. Call-In Pay
An employee who by request or permission of the employer reports for duty on any day, whether or not assigned to actual work, must be paid:
(1) for at least three hours for one shift, or the number of hours in the regularly schedule shift, whichever is less;
(2) for at least six hours for two shifts totaling six hours or less, or the number of hours in the regularly scheduled shift, whichever is less; and
(3) for at least eight hours for three shifts totaling eight hours or less, or the number of hours in the regularly scheduled shift, whichever is less.
7. Working at Tipped and Non-Tipped Occupations on the Same Day
On any day that a service employee or food service worker works at a non-tipped occupation (a) for two hours or more, or (b) for more than twenty percent (20%) of his or her shift, whichever is less, the wages of the employee shall be subject to no tip credit for that day.
Example: An employee has a daily schedule as follows: 8 a.m. to 9:45 a.m., food preparation; 9:45 a.m. to 1:30 p.m., serving food in the restaurant; takes 1/2 hour meal period; 2:00 p.m. to 4:30 p.m. serving food in the restaurant. That employee has worked 8 hours total, consisting of 6 hours, 15 minutes as a food service worker and 1 hour, 45 minutes in a non-tipped occupation. Twenty percent (20%) of an 8 hour shift is 1 hour, 36 minutes. Although the employee worked for less than two hours at the non-tipped occupation, he/she has worked for more than 20% of his/her shift at the non-tipped occupation. Therefore, the employee is subject to no tip credit for that day.
Under the Hospitality Wage Order, when a restaurant employee purchases a required uniform, he should be reimbursed by the restaurant for that cost in the next paycheck. If the restaurant does not launder a required uniform, the employee must be paid the following cleaning expenses:
(1) $9.00 per week (if the employee works more than 30 hour per week)
(2) $7.10 per week (if the employee works more than 20 but less than 30 hours per week)
(3) $4.30 per week (if the employee works 20 hours or less per week).
A required uniform is clothing required to be worn while working at the request of an employer, or to comply with any federal, state, city or local law, rule, or regulation, except clothing that may be worn as part of an employee’s ordinary wardrobe. Ordinary wardrobe means ordinary basic street clothing selected by the employee where the employer permits variations in details of dress.
Under the Hospitality Wage Order, a restaurant 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.
9. Credit Card Fees
When tips are charged on credit cards, an employer is not required to pay the employee’s pro-rated 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-rated portion of the tip taken by the credit card company.
Example: The bill totals $100.00 exactly. The customer leaves, on their credit card, the $100.00 payment of the bill, as well as a $20.00 tip. Both the tip and the bill must be processed through a credit card company which charges a 5% fee on all transactions. The total charge levied by the credit card company on the $120.00 charge is $6.00. Of that $6.00, $5.00 is for the bill (5% of $100) and $1.00 is for the tip (5% of $20). The employer must provide the employee $19, which represents the $20 tip minus $1.00 pro-rated employee’s portion of the surcharge).
10. Wage Deductions
Employers may not make any deductions from wages, except for credits authorized by the Hospitality Wage Order and deductions authorized or required by law, such as for social security and income taxes. Some examples of prohibited deductions are:
(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.
Moreover, if an employee must spend money to carry out duties assigned by his or her employer, those expenses must not bring the employee’s wage below the required minimum wage.
Other significant requirements and policies imposed by the Hospitality Wage Order include record-keeping requirements as to tips, written notice of pay and a prohibition against paying non-exempt employees a daily rate or weekly salary. A full copy of the Hospitality Wage Order can be viewed by clicking here.
The new Hospitality Wage Order clarifies some of the ambiguity which existed in previous Department of Labor regulations. The Hospitality Wage Order also provides important new restaurant worker rights and requirements for restaurant employers. Restaurant attorneys and accountants must be diligent in guiding restaurants employers through these new regulations so that best practices are followed and lawsuits and employee wage and hour litigation is avoided.