Author: Scott Horton

Scott has been practicing Labor & Employment law in New York for almost 20 years. He has represented over 400 employers and authored 100s of articles and presentations and wrote the book New York Management Law: The Practical Guide to Employment Law for Business Owners and Managers. Nothing on this blog can be considered legal advice. If you want legal advice, you need to retain an attorney.

Dues Checkoff

NLRB Changes Course on Dues Checkoff

For many decades, the National Labor Relations Board permitted employers to discontinue dues checkoff arrangements following the expiration of a collective bargaining agreement. More recently, employers’ right to do so has fluctuated depending on which political party has held the majority of seats on the NLRB. On September 30, 2022, the current Democratic majority ruled that employers must continue a contractual dues checkoff despite the expiration of the subject union contract.

Dues Checkoff Provisions

A dues checkoff agreement requires that the employer deduct union dues from employees’ wages and remit them to the union as authorized by the employee. Historically, upon expiration of a collective bargaining agreement (CBA) containing a dues checkoff provision, the employer could lawfully stop collecting dues for the union without having to bargain over the changed practice. In other words, the dues checkoff did not outlive the contract.

Bethlehem Steel Precedent

In 1962, the U.S. Supreme Court held that an employer must maintain employees’ terms and conditions of employment following the expiration of a CBA until the parties either agree to new terms or reach an impasse in their negotiations of a successor agreement. However, the NLRB has always recognized exceptions to this doctrine.

The Board first expressed such an exception for dues checkoff agreements in a 1962 Bethlehem Steel case. There, the NLRB reasoned: “The Union’s right to such checkoffs in its favor . . . was created by the contracts and became a contractual right which continued to exist so long as the contracts remained in force.”

The Bethlehem Steel holding survived at the Board, and in the federal courts, until 2015. Then, with a Democratic majority, the NLRB first held that employers must continue to deduct dues even after the contract expires. By 2019, Republicans gained the Board majority and reinstated the Bethlehem Steel precedent.

Valley Hospital Medical Center Reversal

The 2019 reinstatement of Bethlehem Steel occurred through a case involving Valley Hospital Medical Center. Following that decision, the union requested review by the U.S. Court of Appeals for the Ninth Circuit. The Ninth Circuit remanded the case to the NLRB to “supplement[] its reasoning” for reversing the 2019 decision.

Instead of supplementing the 2019 reasoning, the Board, again with a Democratic majority, rejected the application of Bethlehem Steel. According to the majority opinion, “treating contractual dues-deduction provisions comparably with nearly all contractual provisions, which establish terms and conditions of employment that cannot be changed unilaterally after contract expiration, implements the [National Labor Relations] Act’s policy goals of both encouraging the practice and procedure of collective bargaining and of safeguarding employees’ free choice in the exercise of their Section 7 rights.”

Thus, under the latest Valley Hospital Medical Center ruling, employers must continue deducting union dues despite CBA expiration.

What does this mean for employers?

The NLRB ordered Valley Hospital Medical Center to make the union whole for dues it would have received from employees. This remedy includes paying the unpaid dues with interest to the union. The Board applied this changed interpretation retroactively to all pending cases where dues checkoff is at issue. Accordingly, all employers that have unilaterally stopped withholding and remitting union dues after a CBA expired are no longer in compliance with the law and could be required to pay the dues with interest.

This latest ruling will likely return to the courts for further proceedings. However, there is no certainty of a return to the long-standing Bethlehem Steel exception. Thus, most employers will likely choose to continue dues checkoff following contract expiration as long as the current Valley Hospital Medical Center decision remains the Board’s majority view.

 

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2023 New York Minimum Wage

2023 New York Minimum Wage

Do you know the 2023 New York minimum wage? Actually, there are different minimum wages for different parts of the state and different industries. Employers must be ready before the end of the year to meet the new requirements that apply to their employees.

The 2023 New York minimum wage rates are shaded in blue in the tables below. Note that the changes take effect on the last day of the year, not January 1st.

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Standard New York Minimum Wage

The 2023 New York minimum wage varies by geographic location and sometimes by industry.

For most private employers, the 2023 New York minimum wage in the following chart applies. This chart also applies for non-teaching employees of public school districts or a BOCES. However, there is no New York minimum wage for other employees of public (governmental) employers (but the federal minimum wage of $7.25 does apply).

 

General Minimum Wage Rate Schedule
Location12/31/2112/31/22
NYC – Large Employers (of 11 or more)$15.00$15.00
NYC – Small Employers (10 or less)$15.00$15.00
Long Island & Westchester$15.00$15.00
Remainder of New York State$13.20$14.20

* Annual increases for Upstate New York will continue until the rate reaches a $15 minimum wage. The annual increases will be published by the Commissioner of Labor by October 1. They will be based on percentage increases determined by the Director of the Division of Budget, based on economic indices, including the Consumer Price Index. The report on the December 31, 2023 increase is available here.

Minimum Wage for Tipped Employees in the Hospitality Industry

New York State has separate minimum wage rules for employees in the hospitality industry. These rules apply to businesses running a restaurant or hotel.

The minimum wage rates for most non-tipped employees in the hospitality industry are set as per the schedule above. However, employers may count a portion of certain tipped employees’ gratuities toward the minimum wage requirements. This is known as a “tip credit.”

New York State has two separate cash wage and tip credit schedules for tipped hospitality employees who qualify as “food service workers” and “service employees.”

Food Service Workers

A food service worker is any employee who is primarily engaged in serving food or beverages to guests, patrons, or customers in the hospitality industry who regularly receive tips. This includes wait staff, bartenders, captains, and busing personnel. It does not include delivery workers.

Hospitality Industry Tipped Minimum Wage Rate Schedule (Food Service Workers)
Location12/31/2112/31/22
NYC – Large Employers
(of 11 or more)		$10.00 Cash

$5.00 Tip

$10.00 Cash

$5.00 Tip

NYC – Small Employers
(10 or less)		$10.00 Cash

$5.00 Tip

$10.00 Cash

$5.00 Tip

Long Island & Westchester$10.00 Cash

$5.00 Tip

$10.00 Cash

$5.00 Tip

Remainder of New York State$8.80 Cash

$4.40 Tip

$9.45 Cash

$4.75 Tip

Service Employees

The next schedule applies to other service employees. A service employee is one who is not a food service worker or fast food employee who customarily receives tips above an applicable tip threshold (which also follows schedules, not shown here).

Hospitality Industry Tipped Minimum Wage Rate Schedule (Service Employees)
Location12/31/2112/31/22
NYC – Large Employers
(of 11 or more)		$12.50 Cash

$2.50 Tip

$12.50 Cash

$2.50 Tip

NYC – Small Employers
(10 or less)		$12.50 Cash

$2.50 Tip

$12.50 Cash

$2.50 Tip

Long Island & Westchester$12.50 Cash

$2.50 Tip

$12.50 Cash

$2.50 Tip

Remainder of New York State$11.00 Cash

$2.20 Tip

$11.85 Cash

$2.35 Tip

Fast Food Minimum Wage

Non-exempt employees at some “fast food” restaurants are subject to an alternative minimum wage schedule.

This schedule applies to employees who work in covered fast food restaurants whose job duties include at least one of the following: customer service, cooking, food or drink preparation, delivery, security, stocking supplies or equipment, cleaning, or routine maintenance.

These special New York minimum wage rates only apply to fast food restaurants that are part of a chain with at least 30 restaurants nationally.

As of July 1, 2021, the minimum wage for fast food workers throughout the state is $15.00 per hour. No further increases are currently scheduled.

Note: No tip credit is available for fast food employees.

Overtime Threshold

Along with increases to the 2023 New York minimum wage, the salary requirement to maintain some overtime exemptions will also increase.

The salary threshold for New York’s executive and administrative exemptions go up on December 31st. These amounts are all higher than the federal Fair Labor Standards Act (FLSA) threshold of $684/week. But most New York employers (other than governmental entities) must satisfy the higher New York threshold to ensure full overtime exemption.

There is no salary requirement for New York’s professional exemption. But employers must also satisfy the FLSA threshold for most professional employees. Doctors, lawyers, and teachers do not have a salary requirement for exemption.

Executive & Administrative Exemption Weekly Salary Threshold Schedule
Location12/31/2112/31/22
NYC – Large Employers (of 11 or more)$1,125.00$1,125.00
NYC – Small Employers (10 or less)$1,125.00$1,125.00
Long Island & Westchester$1,125.00$1,125.00
Remainder of New York State$990.00$1,064.25

Prepare Now for the 2023 New York Minimum Wage

New York employers should review their compensation levels and make necessary changes by December 31, 2022. Updates might result in increasing an employee’s hourly wage or salary or reclassifying exempt employees to non-exempt if they will no longer meet the exemption salary requirement.

And, remember, the 2023 New York minimum wage rates only last one year in some cases. Companies will have to review this again next year (or sooner).

To keep up on New York and federal wage and hour requirements and other employment law topics, you can sign up for our email newsletter here or follow us on LinkedIn!

Tip Pooling

Navigating New York Tip Pooling and Tip Sharing Rules

Balancing company revenues and employee compensation is critical to the success of any hospitality business. As profit margins continue to tighten, restaurant and bar owners may need to revisit their tipping practices. Tip pooling and tip sharing are common practices that can benefit employees (and hence their employers). The legal requirements around these tipping topics can depend on both state and federal law. In New York, the state requirements are more restrictive than federal regulations would otherwise allow.

Tip Pooling and Tip Sharing

New York applies the following concepts to requirements related to these tipping issues.

Tip Pooling is the practice by which the tip earnings of directly tipped employees are intermingled in a common pool and then redistributed among directly and indirectly tipped employees.

Tip Sharing refers to a type of tip pool structure in which directly tipped employees keep a certain percentage of their tips, then tip out other indirectly tipped employees with the remaining percentage.

Directly Tipped Employees receive tips from patrons directly without any intermediary between the customer and the employee. Examples of directly tipped employees include servers and bartenders.

Indirectly Tipped Employees support service and are eligible to receive tips from a tip pool, such as bussers, barbacks, and hosts.

Eligible Employees

Back-of-house employees, such as cooks, dishwashers, porters, and other employees, whose primary job function does not involve direct interaction with customers, must be paid at least minimum wage for all hours worked. These employees are ineligible to receive tips or gratuities, and thus, cannot be part of a tip pool.

Front-of-house employees, such as servers, bartenders, barbacks, and bussers, who interact with customers or support the interaction indirectly are also paid at least the minimum wage for all hours worked. But they typically also receive tips and gratuities, and, accordingly, can be part of a tip pool. Hospitality industry employers may apply a tip credit towards their minimum wage obligations to these tipped employees.

Whether an employee is eligible to participate in a tip pooling arrangement depends on their duties and tasks assigned, not their title. To be eligible, the employee must regularly engage in duties that involve providing or helping to provide personal services to customers as an essential element of their job. Accordingly, directly tipped employees in New York restaurants cannot share tips with back-of-house employees, regardless of whether the employer takes a tip credit.

If an employer requires or allows ineligible employees (such as managers and supervisors or back-of-house employees) to share in pooled tip money, it loses the right to apply a tip credit toward the minimum wage requirement and could have to repay the money, with additional fines, to the front-of-house tipped employees.

Tip Credits & New Federal Regulations

When relying on a tip credit, the employer pays a cash wage and supplements that wage with the gratuities earned to reach the minimum wage for all hours worked. However, if the employee’s tips are insufficient to cover the difference between the cash wage paid and the minimum wage, the employer must pay the difference. New York City has a $12.50/hour cash wage with a $2.50/hour tip credit, while the remainder of the state currently has an $11.00/hour cash wage with a $2.20/hour tip credit for service employees.

As of March 1, 2021, new federal regulations under the FLSA permit customer-facing employees (front of house) to share their tips with non-facing employees (back of house) if: (1) the employer does not take a tip credit; and (2) no supervisory or managerial employees participate in the arrangement. These new federal regulations acknowledge that both front and back-of-house employees contribute to the guest experience. However, New York has not followed this expansion of tip pools. Thus, New York employers still must limit their tip pools to employees who regularly provide service to customers.

Review Your Tip Pooling Practices

If you haven’t done so lately, now would be a good time to review tipping procedures carefully. Violations of New York’s tip pooling or tip sharing requirements could be costly, both in terms of employee morale and potential financial penalties arising from wage payment claims.

 

Find out more about Horton Law’s representation of employers in the hospitality industry.