Category: Overtime

November 23, 2018

2019 New York Minimum Wage

Do you know the 2019 New York minimum wage? Employers must be ready before the end of the year to meet the new requirements.

The 2019 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 2019 New York minimum wage varies by geographic location, employer size (where applicable), and sometimes by industry.

For most private employers, the 2019 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**
Location	12/31/17	12/31/18	12/31/19	12/31/20	2021
NYC – Large Employers (of 11 or more)	$13.00	$15.00
NYC – Small Employers (10 or less)	$12.00	$13.50	$15.00
Long Island & Westchester	$11.00	$12.00	$13.00	$14.00	$15.00
Remainder of New York State	$10.40	$11.10	$11.80	$12.50	TBD*

* Annual increases for the rest of the state will continue until the rate reaches a $15 minimum wage. Starting 2021, 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.

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)**
Location	12/31/17	12/31/18	12/31/19	12/31/20	2021
NYC – Large Employers (of 11 or more)	$8.65 Cash $4.35 Tip	$10.00 Cash $5.00 Tip
NYC – Small Employers (10 or less)	$8.00 Cash $4.00 Tip	$9.00 Cash $4.50 Tip	$10.00 Cash $5.00 Tip
Long Island & Westchester	$7.50 Cash $3.50 Tip	$8.00 Cash $4.00 Tip	$8.65 Cash $4.35 Tip	$9.35 Cash $4.65 Tip	$10.00 Cash $5.00 Tip
Remainder of New York State	$7.50 Cash $2.90 Tip	$7.50 Cash $3.60 Tip	$7.85 Cash $3.95 Tip	$8.35 Cash $4.15 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)**
Location	12/31/17	12/31/18	12/31/19	12/31/20	2021
NYC – Large Employers (of 11 or more)	$10.85 Cash $2.15 Tip	$12.50 Cash $2.50 Tip
NYC – Small Employers (10 or less)	$10.00 Cash $2.00 Tip	$11.25 Cash $2.25 Tip	$12.50 Cash $2.50 Tip
Long Island & Westchester	$9.15 Cash $1.85 Tip	$10.00 Cash $2.00 Tip	$10.85 Cash $2.15 Tip	$11.65 Cash $2.35 Tip	$12.50 Cash $2.50 Tip
Remainder of New York State	$8.65 Cash $1.75 Tip	$9.25 Cash $1.85 Tip	$9.85 Cash $1.95 Tip	$10.40 Cash $2.10 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.

**Fast Food Minimum Wage Rate Schedule**
Location	12/31/17	12/31/18	12/31/19	12/31/20	7/1/2021
New York City	$13.50	$15.00
Outside of New York City	$11.75	$12.75	$13.75	$14.50	$15.00

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

Overtime Threshold

Along with increases to the 2019 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, which remains at $455/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 $455/week 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**
Location	12/31/17	12/31/18	12/31/19	12/31/20	2021
NYC – Large Employers (of 11 or more)	$975.00	$1,125.00
NYC – Small Employers (10 or less)	$900.00	$1,012.50	$1,125.00
Long Island & Westchester	$825.00	$900.00	$975.00	$1,050.00	$1,125.00
Remainder of New York State	$780.00	$832.00	$885.00	$937.50	TBD*

Prepare Now for the 2019 New York Minimum Wage

New York employers should review their compensation levels and make necessary changes by December 31, 2018. This 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 2019 New York minimum wage rates only last one year in most cases. Companies will have to review this again next year.

To keep up on New York and federal wage and hour requirements and other employment law topics, you can sign up for the Horton Law email newsletter here!

April 6, 2018

PAID Program Hits Snag for New York Employers

The U.S. Department of Labor recently launched the nationwide Payroll Audit Independent Determination (PAID) program. The PAID Program encourages employers to conduct self-audits of their minimum wage and overtime payment practices. Employers who discover violations and self-report them may avoid penalties under the Fair Labor Standards Act (FLSA).

But . . . New York Attorney General Eric Schneiderman isn’t a fan of this federal program. In response to the launch of the U.S. DOL’s PAID Program, Schneiderman proclaimed:

“The Trump Labor Department’s ‘PAID Program’ is nothing more than a Get Out of Jail Free card for predatory employers.”

Is the Attorney General right? Let’s take a look at what the PAID Program offers, focusing on what all this means for employers in New York.

How the PAID Program Works

This “pilot” program is available to employers across the country. It has three basic components.

Self-Audit

To begin the process, an employer would conduct a self-audit of its compensation practices. If the employer finds compliance concerns it wants to resolve through the U.S. DOL, it must then (according to the DOL):

Specifically identify the potential violations;
Identify which employees were affected;
Identify the timeframes in which each employee was affected; and
Calculate the amount of back wages the employer believes are owed to each employee.

Self-Report

With this information ready, the employer would then contact the U.S. DOL’s Wage and Hour Division (WHD). The WHD will advise the employer what information must be submitted. This apparently will include:

The back wage calculations described above, along with supporting evidence and methodology;
A concise explanation of the scope of the potential violations for possible inclusion in a release of liability;
A certification that the employer reviewed all of the PAID Program’s information, terms and compliance assistance materials; and
A certification that the employer meets all eligibility criteria of the PAID Program.

Payment

The WHD will then follow up with the employer to determine resolution. This will likely include payment of back wages due to employees.

Eligibility Restrictions

Most employers subject to the FLSA are eligible to participate in the PAID Program.

However, an employer cannot participate if the:

WHD or a court has found within the last 5 years that the employer violated FLSA minimum wage or overtime requirements by engaging in the same compensation practices addressed by the self-audit;
Employer is a party to any litigation asserting that the compensation practices in the self-audit violate FLSA minimum wage or overtime requirements.
WHD is investigating the compensation practices at issue in the self-audit;
Employer is specifically aware of any recent complaints by its employees or their representatives asserting that the compensation practices in the self-audit violate FLSA minimum wage or overtime requirements; or
Employer has previously participated in the PAID Program to resolve potential FLSA minimum wage or overtime violations resulting from the compensation practices in the self-audit.

The WHD may otherwise decline to accept any employer into the PAID Program at its discretion.

New York’s Opposition

New York has its own minimum wage and overtime requirements for most private-sector employers. Like the FLSA, these laws include liquidated damages penalties where an employer failed to pay minimum wage or overtime properly. This means that employers found guilty of these wage violations may have to repay twice the amount originally owed. Employees can also recover their attorneys’ fees for these claims. Under New York law, employers may be found liable for unpaid wages going back as far as 6 years from the date of the claim. This is longer than the 2- (sometimes 3-) year statute of limitations under the FLSA.

New York’s Attorney General’s statement against the PAID Program demonstrates that he feels it is not enough that employees will receive the wages they should have been paid in the first place:

Employers have a responsibility under state and federal laws to pay back stolen wages, as well as damages intended to deter them from breaking the law again. The PAID Program allows employers to avoid any consequences for committing wage theft, while blocking lawsuits intended to vindicate employees’ rights.

I want to send a clear message to employers doing business in New York: my office will continue to prosecute labor violations to the fullest extent of the law, regardless of whether employers choose to participate in the PAID Program.

The most straightforward counterargument to Schneiderman’s position is that discouraging employers from self-auditing and self-reporting may mean that employees never recover the wages they should have earned. The state/federal DOLs and private claimants are highly unlikely to uncover every instance of failure to compensate employees properly for minimum wage or overtime.

What This Means in New York

First, it was not a given that the PAID Program would be a great deal for all employers anyway. There are various downsides to self-reporting minimum wage and overtime violations. Beyond having to pay back wages, this may negatively affect employee morale, public image, etc. But the program may benefit some employers depending on their specific circumstances.

Now, however, Attorney General Schneiderman’s announcement raises a major red flag for companies with employees in New York. By raising their hand to participate in the federal PAID Program, these employers would put a target on their backs for state enforcement. FLSA violations would most likely correspond to violations of New York minimum wage/overtime laws. And even if paying back wages arguably precluded further litigation for the same payments, New York’s longer statute of limitations may at least leave employers open to up to 4 more years of liability, including liquidated damages and attorneys’ fees.

Any employer contemplating participation in the PAID Program should definitely consult with an attorney with experience dealing with both the U.S. DOL and New York State DOLs before self-reporting any possible violations. Even if the attorney agrees there has been an underpayment, they may offer better options than the PAID Program. Or, if you go forward with the program, they can assist you in navigating the process appropriately.

If nothing else comes from the PAID Program, employers should use these developments as motivation to review their compensation practices. Misclassification of workers for minimum wage and overtime purposes is one of the most common and costly mistakes employers make.

February 1, 2018

Calculating the Overtime “Regular Rate”

The Fair Labor Standards Act requires employers to pay non-exempt employees overtime if they work enough hours (usually over 40/week). Overtime must be paid at one-and-a-half times the employee’s “regular rate” of pay. Unfortunately, it’s not always so easy to calculate the employee’s regular rate.

Here we’ll look at some of the most common regular rate calculation issues. This article focuses on the federal FLSA. State overtime requirements often borrow the same overtime calculation rules, but state requirements may vary.

Defining the “Regular Rate” of Pay

The FLSA’s statutory definition of “regular rate” is almost as long as this blog post. The first few words define “regular rate” to include “all remuneration paid” to the employee. However, the next several hundred words identify exclusions.

More briefly stated than in the statute itself, these exclusions include certain:

sums paid as gifts;
payments made for occasional periods when no work is performed;
reimbursements for traveling expenses;
discretionary bonuses;
profit sharing;
payments made for employee benefits;
additional compensation for hours worked beyond a specified number in a day/week or outside the normal workday/week;
premium compensation for work on weekends or holidays; and
income derived from qualifying stock transactions.

Many of the items below are more nuanced than described here. So, don’t automatically exclude a payment just because it looks like it might fit on this list.

Significantly, the “regular rate” is an hourly rate. It’s always an hourly rate, even for employees who aren’t paid hourly. Many non-hourly employees are exempt, so it’s not necessary to calculate their regular rate. But some salaried employees are eligible for overtime. And some hourly employees also receive compensation beyond their base pay that counts toward their regular rate for overtime purpose.

When the Regular Rate Differs from the Base Hourly Rate

If a non-exempt employee receives any compensation other than their base hourly rate, the employer must consider what else to include in the regular rate when calculating overtime.

The regular hourly rate of pay of an employee is determined by dividing their total remuneration for employment (except statutory exclusions) in any workweek by the total number of hours actually worked in that workweek.

Let’s look at how this work in several common situations.

Salaried Employees

If an employee’s only form of compensation is a fixed salary per week, then you compute the regular rate by dividing the salary by the number of hours that the employer reasonably intends the salary to compensate. So, if the employee is paid $800 per week to work 40 hours, the regular rate is $20 per hour. If that employee works 50 hours in a given week, then they would need to receive total pay of $1100 [$800 base salary for the first 40 hours and $300 ($20 x 1.5 x 10 hours) for the overtime].

Hourly Wage Plus Commissions

Some hourly employees are eligible to receive commissions or incentive bonuses based on a percentage of sales or another fixed formula. This additional compensation factors into the employee’s regular rate for overtime calculations.

The calculation may be relatively straightforward where commissions are paid weekly. Then you just divide the commissions for the week by the number of hours worked in the week and add it to the base hourly rate earned in the week to determine the overtime regular rate. Take for example a non-exempt employee who works 45 hours with a $10/hour base rate. The employee also earns $90 in commissions in a given week. Their regular rate in that workweek is $12 [the $10 base rate plus $2 ($90 in commissions / 45 hours worked)]. Their total compensation for the week, including overtime, must be $570 [$480 ($12 x 40 hours regular time pay, including commissions) + $90 (5 overtime hours x $12 regular rate, including commissions x 1.5)].

If, however, commissions are not earned and paid weekly, the calculation becomes more complicated. If the amount of commissions earned cannot be determined until after the regular pay day for the workweek in which the employee performed the work that results in the commissions, then the commissions don’t have to be included in the regular rate and paid as overtime on that payday. But, once determined, the commissions will eventually affect the regular rate, and may require additional overtime calculations and payments. The U.S. Department of Labor has specific rules for calculating the regular rate and allocating the commissions over earlier workweeks in order to fully compensate the employee for overtime earned.

Employees Working at Two or More Rates

Sometimes employees receive different rates of pay depending on what jobs or tasks they perform. By default, the regular rate is then determined by taking the weighted average of the separate rates earned. This means that the regular rate of an employee who spends 30 hours working for $15 and 20 hours working for $10 would be $13 per hour ($450 + $200 / 50). So the employee’s total compensation would be $715 [$450 + $200 + $65 (the half-time portion of the 10 overtime hours, since the regular time portion is already included here)].

An employer may, however, have the option of instead paying overtime calculated at 1.5 times the rate for the specific work performed during the overtime hours. Using the previous example, if the employee had worked all of the overtime in the job that pays $10 per hour base, then the regular rate for the overtime could be just the $10, rather than the weighted average wage. But the employee would have to apply this approach consistently, such that if the employee’s overtime (i.e., the last hours worked in the week beyond 40) were in the higher paying job, then the regular rate would be $15 rather than $10. For the employer to use this approach, the employee must know of and be willing to work under this overtime structure before beginning the work.

The second method might be disallowed if an employer uses it to systematically reduce an employee’s overtime pay. This might be case where the employer always requires the employee to perform the lower-rate work at the end of the week. Then the employer may need to revert to the weighted average method.

Many More Regular Rate Scenarios Exist

These are just some of the most common methods for determining regular rate of pay for FLSA overtime purposes. The U.S. Department of Labor has permitted various other exceptions and approaches, either based on direct statutory instructions or as enforcement practicalities. Employers facing non-routine overtime issues should confer with experienced legal counsel. Mistakes in overtime calculations can lead to significant underpayment liability for employers, including liquidated damages and potentially attorneys’ fees.