LAB-42-10-00005-P Hotel and Restaurant Wage Orders
10/20/10 N.Y. St. Reg. LAB-42-10-00005-P
NEW YORK STATE REGISTER
VOLUME XXXII, ISSUE 42
October 20, 2010
RULE MAKING ACTIVITIES
DEPARTMENT OF LABOR
PROPOSED RULE MAKING
NO HEARING(S) SCHEDULED
I.D No. LAB-42-10-00005-P
Hotel and Restaurant Wage Orders
PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following proposed rule:
Proposed Action:
Repeal of Parts 137 and 138; and addition of Part 146 to Title 12 NYCRR.
Statutory authority:
Labor Law, sections 21(11), 199, 653 and 656
Subject:
Hotel and Restaurant Wage Orders.
Purpose:
Combine the Hotel and Restaurant Wage Orders into one Wage Order titled Hospitality Wage Order.
Substance of proposed rule (Full text is posted at the following State website:www.labor.ny.gov):
The proposed new rule will combine the wage orders for the restaurant and hotel industries (12 NYCRR 137 and 138) into a single new Minimum Wage Order for the Hospitality Industry (12 NYCRR 146). Regarding tips, the proposed regulations replace departmental policies and case law with new regulations to provide clarity and uniformity throughout the hospitality industry. They simplify by consolidating the current two-tiered tip credits, which depend on the amount of tips received, into a single tier for most employees. They eliminate a separate tip credit for housekeeping employees in resort hotels, consolidating them with other tipped service employees. (However, the proposed regulations do retain several special provisions for resort hotels only, namely a higher tip credit for non-food service employees and higher meal and lodging credits for all employees.) They consolidate two-tiered meal credits into a single tier for most employees. They eliminate unnecessary housing regulations by simply requiring compliance with all state, county and local health and housing codes. They eliminate overtime pay requirements unique to the hotel industry, leaving only time-and-a-half after 40 hours as the common rule for all covered workers in the hospitality industry. They extend extra payments that currently apply only to employees at or near the minimum hourly rate (call-in pay, excessive spread of hours pay, uniform maintenance pay) to all covered employees, thus eliminating a phase-out as wage rates rise that is poorly understood and cumbersome to calculate. Extending these extra payments from a limited class to all covered employees will help to make these requirements less obscure and more widely known.
Subpart 146-1 entitled "Minimum Wage Rates" sets forth the basic minimum hourly wage rate for employees in the hospitality industry, allows for tips credits toward the minimum wage, requires that employers in the hospitality industry pay an increased hourly rate for hours worked over forty per week, provides for payment of wages in "call-in" situations and requires spread of hours pay for employees in restaurants and non-resort hotels. Further, this section provides for uniform maintenance pay, the cost of purchasing required uniforms and allows for credits toward the minimum wage for meals and lodging.
Subpart 146-2 entitled "Regulations" sets forth the records employers are required to keep, mandates written notice to employees of pay rates, tip credit and pay day, as well as the provision of wage statements to each employee with every payment of wages. Employers must post minimum wage provisions in the place of employment, and must pay employees at an hourly rate, rather than salary, piece rate, or any other non-hourly rate of pay. The minimum wage requirements must be met on a week by week basis, regardless of the frequency of the payment of wages. Employers are prohibited from making deductions from pay for such things as spoilage and breakage. Minimum requirements are set forth for the provision of meals and housing for employers taking those allowances toward the minimum wage. Employees working in both tipped and non-tipped jobs, or occupations covered by both the hospitality wage order and another wage order, must be paid at whatever rate is applicable to the highest paying job or wage order, depending on the hours worked or percentage of hours worked at each job. Trainees, learners or apprentices must still be paid in accordance with this part. Students obtaining vocational experience to meet curriculum requirements shall not be deemed to have been permitted or suffered to perform work, and participants in rehabilitation programs approved by the commissioner shall be paid in accordance with the requirements of the approved program to satisfy this part. Definition of the terms "tip pooling" and "tip sharing" are provided, as well as the circumstances under which each is permissible, the degree to which the employer may require tip pooling and sharing, and the records the employer is required to keep when operating tip pooling or tip sharing. A rebuttable presumption is created that any charge in addition to the bill for such things as food, beverage and lodging is to be considered a gratuity. Employers are permitted to run the employees' tips through the employer's credit card machine without incurring the extra cost of associated with the same.
Subpart 146-3 entitled "Definitions" provides definitions for the terms "hospitality industry", "hotel", "all year hotel" and "resort hotel". This subpart specifies which types of employees are covered, and provides definitions of individuals employed in a bona fide executive, administrative or professional capacity, as an outside sales person, golf caddy, camper worker and staff counselor. This subpart further defines "service employee", "non-service employee" and "food service worker". Definitions of the terms "regular rate of pay", "working time", "meal", "lodging", split shift", "required uniform", "ordinary wardrobe" and "week of work" are all contained in the this subpart, as applicable to the entire part.
Text of proposed rule and any required statements and analyses may be obtained from:
Benjamin Shaw, New York State Department of Labor, State Office Campus, Building 12, Room 509, Albany, New York 12240, (518) 457-4380, email: usfbas@labor.ny.gov
Data, views or arguments may be submitted to:
Same as above.
Public comment will be received until:
45 days after publication of this notice.
Regulatory Impact Statement
1. Statutory authority:
The statutory authority for the promulgation of this rule is found in Labor Law sections 653, 656, 199 and 21(11).
2. Legislative objectives:
Pursuant to Section 650 of the Labor Law, the stated purposes of Article 19 (the Minimum Wage Act) are: to ensure that wage levels are sufficient to provide adequate maintenance for employees and their families; to promote the health, efficiency and well-being of employees; to prevent unfair competition against other employers and their employees; to promote stability of industry; to maintain the purchasing power of employees; and to minimize the necessity to supplement wages with public money for relief or other public and private assistance.
More generally, section 21(11) authorizes the Commissioner of Labor to issue regulations governing any provision of the NYS Labor Law.
3. Needs and benefits:
Problems identified repeatedly in oral and written testimony submitted to the Wage Board were excessive complexity of regulations, opacity of departmental policy and reliance on case law, inconsistent application, and lack of knowledge or understanding of the regulations by affected and regulated parties.
To remedy these problems, the regulations have been amended to explain all requirements more clearly, using plain language and examples. They consolidate two regulations (12 NYCRR 137 and 12 NYCRR 138) regarding the hotel and restaurant industries into one new regulation (the hospitality industry) at 12 NYCRR 146. Regarding tips, the proposed regulations replace departmental policies and case law with new regulations to provide clarity and uniformity throughout the hospitality industry. They eliminate unnecessary housing regulations by simply requiring compliance with all state, county and local health and housing codes. They eliminate overtime pay requirements unique to the hotel industry, leaving only time-and-a-half after 40 hours as the common rule for all covered workers in the hospitality industry. They extend extra payments that currently apply only to employees at or near the minimum hourly rate (call-in pay, excessive spread of hours pay, uniform maintenance pay) to all covered employees, thus eliminating a phase-out as wage rates rise that is poorly understood and cumbersome to calculate.
(b) Underpayments arising from failure to pay an hourly rate and/or to pay premium overtime pay.
Existing regulations do not prohibit paying salaries to non-exempt workers, per se, although they do require that the salary cover at least the minimum hourly rate for all hours worked and they do require extra pay in addition to the salary, at a half-time of the regularly hourly rate, for any overtime hours. Currently, when non-exempt workers are paid a salary for all hours worked, the "regular rate" must be derived by dividing the salary by the total number of hours worked during that pay period. For hours worked in excess of forty per week, the employee must be paid time plus one half the regular rate. This requirement, well established in case law, is not well known, and multitudes of overtime violations result from payment of weekly rates. Under the current regulations, which technically allow non-exempt workers to be paid by salary, even a well meaning employer can easily end up violating both the minimum wage/overtime and record keeping requirements of Article 19 and its current attendant regulations.
To remedy these problems, the proposed regulations require that: (i) all non-exempt employees (except commissioned salespeople) be paid an hourly rate; (ii) at the time of hiring and at any time prior to a change in the wage rates, employers must give employees written notices of their regular and overtime hourly rates; and (iii) employers are specifically prohibited from paying employees (except commissioned salespersons) on any basis other than an hourly rate and failure to do so shall result in the commissioner's calculation of an hourly rate by dividing the employee's total weekly earnings, not including exclusions, by the lesser of 40 hours or the actual number of hours worked by the employee during that work week, with the determination of regular and overtime wages due to be based upon such calculated hourly rate.
(c) The size of the gap between regular minimum wage and the tipped rates.
The tipped rate as a proportion of the general minimum rate has declined as follows: 70% in 1974, 69% in 1981, 68% in 1991, and 64% (food service) and 68% (non-food service) from 2000 to the present. Food service workers vastly outnumber other tipped occupations in the industries and the decline of their pay rate as a proportion of the general minimum rate amounts to $.425 per hour or $17 per 40-hour week or $884 per year.
The proposed $.35 per hour increase in the rate for tipped food service workers only partially recoups the loss. Although small, it is a step in the right direction. Occupations affected by it include waitstaff, bussers and dining room attendants, bartender assistants, bartenders, room service waitstaff and others.
The other proposed increase is $.75 per hour in the rate for tipped non-food service workers. The tipped rate of these workers as a proportion of the general minimum rate has declined from 70% in 1974 to 68% in 2009, or $.175 per hour or $7.00 per week or $364 per year. Unlike the $.35 increase, the $.75 proposed increase is not merely playing catch-up. Instead, it advances these occupations to 78% of the general minimum wage. The occupations covered by this increase include baggage porters, bellhops, door persons, housekeepers, valet parkers and food delivery workers.
(d) Bring clear and equitable rules for handling tips into the regulations.
The proposed regulations flesh out Section 196-d, the Labor Law prohibiting tip appropriation, with basic rules for the handling of tips and mandatory charges on guest bills purported to be gratuities or substitutes for gratuities. They clarify and fill in interstices in the statute by consolidating and incorporating previously issued case law, departmental guidelines, and departmental opinion letters. They allow employees to voluntarily share or pool their tips, allow employers to require tip sharing or tip pooling, allow employers to set the percentages to be shared with or distributed to various service occupations, limit the occupations eligible to receive shares of tips to those that provide direct personal service to patrons, and those that assist the direct service providers to do so, require written notice upon hiring to employees of any tip pooling system, require employers to keep specified records on shared and pooled tips and mandatory charges purported to be gratuities or substitutes for gratuities, relieve employers of any liability for an employee's wrongful withholding of his or her tips from shared or pooled tips, require employers to give all employees access to tip records but not the payroll records of other employees, require employers to distribute in full to employees as gratuities any charge on a guest bill that would be understood by the reasonable customer to be a gratuity or substitute for a gratuity, establish a rebuttable presumption that any charge for "service" or "food service" is a charge purported to be a gratuity, require written notice to customers when a charge for the administration of a banquet, special function or package deal is not a gratuity to be distributed to the employees who provided the service, and require employers to return to employees the full amount of any tips charged to credit cards, less the pro-rated portion of the tip taken by the credit card company.
(e) Existing call-in, spread of hours, and uniform maintenance protections exclude many workers.
Current regulations give these protections only to workers paid at or near the minimum hourly rate. The proposed regulations extend the protections involving these matters to all covered workers, and clarify these requirements for the benefit of both employer and employee.
Current regulations require uniform maintenance pay even when the uniforms are made of wash and wear material and are routinely washed and dried with other personal garments, i.e., no extra care is required. This is unnecessary. Under the proposed regulations, by adopting a wash-and-wear exemption, far fewer uniforms trigger the extra pay.
(g) Avoid captive audience for meal purchases.
The proposed regulations requires employers, whenever the shift is long enough to invoke the meal period law, to either allow employees to bring their own food or give them a meal at a cost no greater than the meal credit amount in the wage order.
4. Costs:
Costs: There are no added costs to the Department of Labor or to state and local governments. Following are the cost effects on hospitality industry businesses.
(a) The minimum hourly rate for tipped non-food service employees increases by $.75 per hour. The minimum hourly rate for tipped food service employees increases by $.35 per hour.
(b) A minimum of three hours call-in pay must be paid to all employees, with payment for actual attendance to be paid at the employees' regular or overtime rate minus tip credit and payment for the balance of the call-in period to be made at the minimum wage with no tip credit subtracted.
(c) An extra hour of pay at the minimum hourly rate for a workday with a spread of hours greater than10 is extended to all covered employees. Each such day will cost an additional $7.25.
(d) The adoption of a wash-and-wear exemption will reduce costs for a large number of businesses that currently pay uniform maintenance pay and will no longer be required to do so. The reduction in costs will be up to $9.00 per week per uniformed employee.
(e) The extension of uniform maintenance pay to all covered employees will increase costs for those employers who have above-minimum wage employees who are required to wear uniforms that require special care. The increase in costs will be up to $9.00 per week per above-minimum wage uniformed employee.
(f) Meal credits that employers may take for providing meals to food service workers in restaurants and all-year hotels are increased by $.15 per meal, reducing business costs by that amount.
(g) The added cost of complying with the new requirement to give written pay notices to employees whenever their pay rates change is minimal, mainly consisting of the time it takes to fill out a simple pay notice and obtain the employee's signed receipt, times the number of employees affected.
(h) The requirement that non-exempt employees be paid hourly rates is neutral with respect to costs.
(i) However, there is an added cost, after an employer has failed to pay an hourly rate. The proposed regulations treat the salary as constituting the straight time pay for only the first 40 hours and thus require the payment of full time-and-a-half for the overtime hours, in addition to the salary.
(j) The added cost of lowering the overtime pay threshold for residential employees in hotels from 44 hours to 40 hours is one-half the employee's rate of pay times up to 4 hours, whenever the employee works overtime.
(k) The cost reduction from eliminating the overtime premium on the 7th day when a resort hotel employee works less than 40 hours in a week but works a schedule spread over 7 days is the one-half the employee's regular rate times the number of hours worked on the 7th day.
(l) The costs of keeping records on tip pooling, tip sharing, and mandatory charges on guest bills for gratuities will be new costs for those employers who require pooling or sharing and/or who make mandatory charges, unless they already keep such records for their own operational needs.
(m) The time and costs of disputation and litigation will be reduced for businesses and for the Department of Labor.
5. Local government mandates:
None. Federal, state and local governments and political subdivisions thereof are excluded from coverage under the proposed wage order by Labor Law Section 651.5(n) and 651.5 (last paragraph).
6. Paperwork:
The two new paperwork requirements are: (a) businesses in the hospitality industry will be required to keep and retain for six years records related to tip pooling, tip sharing, charges for gratuities, and charges for services unrelated to gratuities; and (b) employers will be required to give written pay notices to employees whenever pay rates change and to retain signed acknowledgments of receipt for six years.
7. Duplication:
The proposed rule does not duplicate any other state regulations.
8. Alternatives:
The Wage Board considered many alternatives and proposals before adopting its recommendations. Several were debated strenuously. Individual members of the board may not agree with every final Board recommendation. Each understood that some compromises were necessary. Some decisions involved prioritizing what was most important and balancing of interests. All Board members supported the final Report as a whole.
9. Federal standards:
The federal Fair Labor Standards Act expressly provides that when states have higher or stricter standards, the higher or stricter standard will apply.
Currently, both federal and NYS laws set a minimum rate of $7.25 per hour and overtime pay at one-and-one-half times the regular rate. The proposed rule exceeds federal standards in the following areas:
The proposed NYS regulations require employers to pay tipped employees at least $4.75 per hour this year and at least $5.00 per hour in 2011. The proposed NYS regulations do not allow fair market value credits toward the minimum wage and instead set low fixed limits on the value of meals and lodging as part of the wages paid to employees.
The federal standards set a weekly minimum wage, while some requirements in the proposed NYS regulations apply to both minimum wage and above-minimum wage workers (call-in pay, excessive spread of hours pay, and uniform maintenance pay).
The proposed NYS regulations require at least 3 hours pay for reporting to work, unless the employee has a regularly scheduled shift that is shorter. The proposed NYS regulations require an extra hour of pay when the spread of hours is greater than 10. The proposed NYS regulations prohibit such deductions in their entirety, protecting the wages of above-minimum wage workers as well as minimum wage workers. The proposed NYS regulations do require that such charges be distributed to employees as tips. The proposed NYS uniform maintenance pay amounts are definite, stated amounts and must be added to the wages of all non-exempt employees at any pay rate.
10. Compliance schedule:
Regulated entities should be able to achieve immediate compliance with the regulations. All of the payments to employees required in the proposed rule are types of payments already required by the existing regulations, so that the payroll processes necessary for these payments already exist at all complying enterprises. For the same reason, employers compliant with current regulations will not have any difficulty understanding the payments required under the new regulations.
Regulatory Flexibility Analysis
1. Effect of rule: No local governments will be affected by these regulations. All restaurants and hotels, including small ones, will be affected. The types of businesses included in the terms "restaurant" and "hotel" are specified in Section 146-3.1 of the proposed regulations. Based on 2008 data, approximately 41,800 hotels and restaurants with a combined total of approximately 577,000 employees are located in New York State.
2. Compliance requirements: There are no reporting requirements. New recordkeeping requirements are: (a) to keep records of tip sharing, tip pooling and service charges, and (b) to give written notices to employees when pay rates change and obtain signed acknowledgments of receipt.
All covered employees, except commissioned salespersons, must be paid an hourly rate. If a business fails to pay an hourly rate, then the salary will cover the straight-time pay only for the first 40 hours and full "time-and-a-half" will be due for any overtime hours. The overtime pay threshold for residential employees in hotels goes down from 44 hours to 40 hours and overtime on the 7th day in resorts is eliminated. (Current regulation 138-2.2 states that when employees of resort hotels work seven consecutive days, they must be paid overtime for all hours worked on the seventh consecutive day). The minimum rates of pay for tipped employees increase $.35 per hour for food service workers and $.75 per hour for other tipped workers. Call-in pay, spread of hours pay, and uniform maintenance pay are extended to all employees. However, businesses that require only wash-and-wear uniforms and provide a sufficient number of uniforms to employees will no longer have to pay uniform maintenance pay. The meal credits employers may take for providing meals to food service workers are increased. There are regulations regarding tip pooling, tip sharing and the handling of tips and service charges on credit card bills. Tip pooling and tip sharing may be required by the employer or implemented by the employees. If the tip pooling or tip sharing is required by the employer, the employer must keep records of the tips collected, lists of the participating occupations and the share of each tip to which they are entitled and the amount of tips received by each employee from the tip share or tip pool.
3. Professional services: These regulations will not necessarily require small businesses to obtain additional professional services. If records of tip sharing, tip pooling and/or service charges have previously been limited to informal worksheets or the like, a bookkeeper or accountant's assistance may help to come into compliance with the new record-keeping requirements.
4. Compliance costs: As explained in the Regulatory Impact Statement, the minimum hourly rate for tipped non-food service employees increases by $.75 per hour and for tipped food service employees increases by $.35 per hour. The cost of providing written pay notices to employees is minimal. Such notices need only be provided to employees who don't read English if the Department has made such notices available at no cost to employers in the employee's primary language, thereby resulting in no additional cost to the employer. Costs may increase for overtime served by residential employees in hotels because overtime will now be triggered after 40 hours work rather than 44 hours. Costs for above minimum wage employees who work spreads of hours greater than 10 in a day will increase by $7.25 per employee. Additional costs related to new record keeping requirements for tips and gratuities will depend upon how much employers will need to adjust their existing recordkeeping practices. Costs reductions include $.15 per meal for employers who provide meals to employees and elimination of uniform maintenance costs for wash and wear uniforms that do not need special care. Annual costs cannot be estimated as they will vary with the size of the business, the type of business and the particular practices of the business regarding employees' work hours, meals, lodging, uniforms and tips.
5. Economic and technological feasibility: Immediate compliance will be economically and technologically feasible. Overtime pay, tip credits, meal and lodging credits, call-in pay, spread of hours pay, and uniform maintenance pay have existed for decades in the hotel and restaurant industries. Payroll procedures have been already set up. New record-keeping for tips and service charges is within the capacity of businesses in the industry to set up, if they have not already done so.
6. Minimizing adverse impact: To minimize any adverse impact from increasing the minimum hourly wage rates for tipped employees, the increase has been divided into two steps ($.10 in 2010 and $.25 in 2011).
7. Small business and local government participation: No local governments participated. A six-member wage board of unpaid citizens met, took public testimony and deliberated for over 5 months. Two board members were from the NYS Restaurant Association and the NYS Hospitality and Tourism Association. Both associations include small businesses among their members. At three public hearings held in Buffalo, Albany and New York City, and by written testimony, some 59 persons owning, managing or representing businesses in the hospitality industry submitted testimony. The 59 people included persons from numerous independent restaurants and hotels, small sole proprietorships and family businesses, small partnerships and investor-owned businesses, and participants in franchised chains. After the wage board issued its report and recommendations, public notice was published and another public comment period of 15 days ensued.
Rural Area Flexibility Analysis
1. Types and estimated numbers of rural areas: These regulations apply to all restaurants and hotels in rural areas of the state. The proposal specifically includes rural area location in two of the three characteristics that define "resort hotel." In 2008, the hotel industry employed approximately 81,000 people in approximately 2,800 establishments statewide. The restaurant industry employed approximately 486,000 people in approximately 39,000 establishments statewide. Following is data on the number of establishments and employment in the hotel and restaurant industries by region in 2008. While rural areas have not been separated out from suburban and urban areas, the available data demonstrates that the hospitality industry is located throughout rural areas of the State.
Hotels:
Capital District - 422 establishments, 6,322 employees;
Western NY - 2,897 establishments, 45,554 employees.
2. Reporting, recordkeeping, and other compliance requirements; and professional services: There are no new reporting requirements. There are two new recordkeeping requirements: (a) records on tip sharing, tip pooling and service charges. Rural area businesses that require employees to share or pool tips or that assess mandatory charges on guest bills for gratuities will need to keep records that can be adequately understood at a later date and are retained for six years. These are ordinary transactions in the normal course of business. Some employers may want the assistance of a bookkeeper or accountant in setting these up. The Department is not able to estimate the cost; (b) written notice must be given to employees whenever pay rates change, signed by the employee, and retained for six years. This does not require any additional professional services. While such notice must be provided in a language other than English if the employee doesn't read English, the requirement will only attach if the Department has developed notices in the necessary language and made them available to employers on its website. There are new compliance requirements for regulated employers regarding tip pooling, tip sharing, and service charges. In the time since a law against tip appropriation was passed in 1968, enforcement has relied on evolving departmental guidelines and case law. As recommended by the Wage Board, the new regulations set out and clarify the requirements. The regulations are expected to improve compliance with the law and reduce disputation and litigation.
3. Costs: The minimum hourly rate for tipped non-food service employees increases by $.75 per hour and for tipped food service employees increases by $.35 per hour. The cost of providing written pay notices to employees is minimal. Costs may increase for overtime served by residential employees in hotels in rural areas because overtime will now be triggered after 40 hours work rather than 44 hours. Costs for above minimum wage employees who work spreads of hours greater than 10 in a day will increase by $7.25 per employee. Additional costs related to new record keeping requirements for tips and gratuities will depend upon how much employers will need to adjust their existing recordkeeping practices. Costs reductions include $.15 per meal for employers who provide meals to employees and elimination of uniform costs for wash and wear uniforms that do not need special care.
4. Minimizing adverse impact: To minimize any adverse impact from increasing the minimum hourly wage rates for tipped employees, the increase has been divided into two steps ($.10 in 2010 and $.25 in 2011).
5. Rural area participation: A six-member wage board of unpaid citizens met, took public testimony and deliberated for over 5 months. Two board members were from the NYS Restaurant Association and the NYS Hospitality and Tourism Association. Two board members were from UNITE HERE and the NY Hotel and Motel Trades Council, AFL-CIO. Two board members represented the general public, including the chair of the board from the School of Industrial and Labor Relations at Cornell University and a former Assistant Attorney General from Long Island. The board held 3 public hearings around the state. In Buffalo, 8 speakers from the region testified. In Albany, 10 speakers from the region and from Central New York testified. The third hearing was in New York City. Written testimony was received from 67 persons from many areas including rural areas of the state, who were owners, managers, and employees at restaurants and hotels. After over 5 months of deliberations, the wage board issued its report, after which a 15 day comment period ensued. The commissioner of labor accepted most of the board's recommendations and modified a few, giving her reasons.
Job Impact Statement
1. Nature of impact:
It is apparent from the nature and purpose of the rule that it will not have a substantial impact on jobs or on employment opportunities.
These regulations are not expected to have a significant impact on jobs and employment opportunities for non-tipped employees paid the minimum wage. A recent study of the fast food industry in four other states has found that the impact of an increase in the minimum wage rate on employment rates is negligible in the positive or the negative (see The Effect of a Raised Minimum Wage on Employment: Differences Across State and Social Groups, St. Lawrence University 2009). Here, there is no general increase in the minimum wage rate, as the minimum hourly rate for non-tipped employees stays the same.
In regard to tipped employees, the purpose of these increases is not only to increase these tipped wage rates alone, but also to combine two different wage orders concerning different minimum wages for tipped employees working in different industries. The minimum hourly rate increases from $4.65 per hour to $5.00 per hour for tipped food service workers and from $4.90 per hour to $5.65 per hour for other tipped workers. The Wage Board representatives from the hotel and restaurant industries, as well as information provided by employers in these industries, indicated the need to simplify the wage order, which currently contains different minimum wage rates for tipped employees in the food service industry than tipped employees in the hotel industry, as well as two tiers of tipped rates within each industry. To that end, these regulations take the first steps toward creating one minimum wage rate for all tipped employees. In order to avoid any possible or perceived negative impact on the effected industries, the tipped minimum wage rate increases are enacted in steps, mindful of the difficulties a sudden large change would present to struggling businesses.
The Wage Board recognized that it was in the interest of both employees and employers to reduce the number of worker classifications, along with their respective different minimum wage rates for tipped employees, and recommended that this increase occur over time. Again, these increases in minimum wage rates for tipped employees are not an increase in the minimum wage rate for all employees, do not increase the amount an employee is required to ultimately earn each hour in wages plus tips to meet the existing hourly minimum wage rate, and have the ultimate goal of simplifying the calculation of minimum wage rates for all tipped employees for the benefit of those employees as well as the employers, which currently must attempt to ascertain which employees fit into which categories and pay those employees at different rates, depending on their job duties.
Certain extra payments (uniform maintenance, spread of hours, call-in pay) are extended from minimum wage workers to all covered workers, but these extra payments are required only under certain circumstances that are within the control of the employer and usually can be avoided.
The net effect on costs will depend on the size, type and practices of the particular business. Costs will increase for businesses affected by the increase in minimum hourly rates for tipped employees. By the same token, costs will decrease for businesses benefitting from the adoption of the wash and wear exemption from uniform maintenance pay. Costs can change very little or not at all for businesses in which the two effects cancel each other out. Employers who have no tipped employees, such as sole proprietorships, as well as other establishments where the owner(s) perform the job duties of tipped employees while having other employees perform non-tipped duties (such as desk clerk and maintenance), the fast food industry, buffets, cafeterias, take-out restaurants, food stands, childrens' camps, adult camps, and auto and recreational vehicle partks, will not be affected by the increase in minimum hourly rates for tipped employees. The proposed regulations will have the significant benefit of reducing confusion and uncertainty on the part of employers regarding their legal obligations through simplification of the current wage order, elimination of unnecessary provisions, consolidation of other provisions, clarification of language, and including, for the first time, explicit regulations governing tips.
