LAB-42-10-00005-A Hotel and Restaurant Wage Orders
12/29/10 N.Y. St. Reg. LAB-42-10-00005-A
NEW YORK STATE REGISTER
VOLUME XXXII, ISSUE 52
December 29, 2010
RULE MAKING ACTIVITIES
DEPARTMENT OF LABOR
NOTICE OF ADOPTION
I.D No. LAB-42-10-00005-A
Filing No. 1268
Filing Date. Dec. 14, 2010
Effective Date. Jan. 01, 2011
Hotel and Restaurant Wage Orders
PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following action:
Action taken:
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:
To combine the Hotel and Restaurant Wage Orders into one Wage Order titled Hospitality Wage Order.
Substance of final rule:
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.
Final rule as compared with last published rule:
Nonsubstantial changes were made in sections 146-1.1(b) and 146-1.3.
Text of 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
Revised Regulatory Impact Statement, Regulatory Flexibility Analysis, Rural Area Flexibility Analysis and Job Impact Statement
There have been no substantial revisions or changes in the text of the Proposed Rule necessitating a modification in the Regulatory Impact Statement, Regulatory Flexibility Analysis, Rural Area Flexibility Analysis and Job Impact Statement as published in the State Register on October 20, 2010, a revised RIS, RFA, RAFA and JIS is not required.
Assessment of Public Comment
The Department received twenty (20) comments from interested parties during the 45-day public comment period which followed the publication of the proposed regulations in the State Register on October 20, 2010. All comments received were reviewed and assessed in accordance with the provisions of the State Administrative Procedure Act. The issues raised in these comments are discussed below.
COMMENT: Five commenters urged delay in the effective date of the regulations to give the industry time to learn about and prepare for changes and two commenters urged their immediate adoption.
RESPONSE: The effective date will be 1/1/11 for these regulations, for the food service worker rate to increase from $4.65/hr to $5.00/hr, and for the service employee rate to increase from $4.90/hr to $5.65/hr. The regulations have been through a long period of development that included three public hearings on 5/6, 5/15 and 5/20/09, wide publicity, a record amount of public and industry input, and the posting of the proposed regulations on our website since October 20, 2010. In the Wage Board's report and recommendations issued 9/18/09, they recommended the new regulations become effective on 1/1/10, including minimum rate increases of $.75/hr for service employees and $.10/hr for food service workers, with a follow-up rate increase of $.25/hr for food service workers effective 1/1/11. The pay increases have been delayed a year but we think the industry has been alertly watching and that businesses are capable of implementing the new rates and regulations by the effective date. Due to the length of the rulemaking process, the phase-in for the tip credits for food service workers would have been reduced to, at most, a two (2) day period (i.e. December 30 and 31, 2010). Therefore, the removal of the phase-in from the proposed rulemaking is a non-substantive revision. The final effective date of January 1, 2011, for the implementation of the wage rate is clearly listed in the proposed regulation, and was recommended by the Wage Board in September of 2009.
COMMENT: Seven commenters objected to the $.35 per hour increase in the minimum rate of pay for tipped food service workers and five commenters were supportive of the increase. Objectors variously argued that it would be a hardship to the restaurant industry and to hotels with food service operations; that it would force businesses to reduce the number of employees or close down operations; that when tip income is included, waitstaff are already more highly paid than other hourly workers, such as kitchen workers, and even managers. Several cited a troubled economy; one mentioned that the smallest operations have less ability to offset cost increases than larger ones; and one recommended deferring the pay increase until the economy improved.
RESPONSE: We are not making any change to this provision as a result of the comments received. In the Regulatory Impact Statement, we noted that the minimum rate for tipped food service workers as a proportion of the general minimum rate declined from 70% in 1974 to 64% in 2010. This decline amounts to $.425 per hour or $17 per 40-hour week or $884 per year. We believe this long-run decline was not recognized at the time and was not a policy goal. The proposed $.35 per hour increase partially recoups the loss, restoring the rate to 69% of the general minimum rate. Food service workers are by far the largest group of tipped workers in the industry and include waitstaff, bussers, food runners, short-order counter workers, bartenders, barbacks, and room service waitstaff. We believe the $.35 rate increase is a modest one not out-of-line with historical levels.
COMMENT: Five commenters objected to the spread of hours pay requirement and/or its extension to workers at all pay levels. One commenter supported the requirement and its extension in recognition that an employee has given a large portion of a workday to an employer. Some objectors felt it should be eliminated entirely, and if not eliminated, should be limited to employees at or very near the minimum rate of pay (as existing regulations do). Commenters argued that it reduces the availability of alternative work schedules needed by today's workforce of working mothers, elder caretakers, and working students. Extending it to all workers regardless of pay rate is an unwarranted windfall to the more highly compensated employees (line cooks, sommeliers) who employers view as more indispensible, while being an incentive to reduce the hours of the lower paid, less skilled workers (bussers, runners) who are more easily substitutable. One commenter said that spread of hours pay is not beneficial for tipped workers, because it penalizes scheduling them for a split workday consisting of the busiest periods, when tip earnings are maximized. Commenters also argued that compliance is costly and difficult to achieve because spreads are not picked up by automated timekeeping systems; they require time-consuming and onerous daily manual perusal of time records; that the requirement is obscure, unique to New York State, not understood, and causes litigation with costs dwarfing the amounts of money involved; that it is an ineffective way to encourage increased employment in the industry. One commenter said the additional pay is insignificant to the employee but costly in the aggregate to the employer and asked that if the provision is retained, gratuities received in excess of the tip credit be allowed to offset it; this commenter also disagreed with extending call-in and uniform maintenance pay to all employees at any pay level. Another commenter argued that extending spread of hours, call-in and uniform maintenance pay to all employees at any pay level exceeded our minimum wage authority. One commenter asked for clarification whether extra call-in pay hours must be counted in determining whether a spread of hours greater than 10 has been worked (the answer is no).
RESPONSE: We are keeping the spread of hours pay and its extension to covered employees at any pay rate. Spread of hours pay has long been required in NYS; the only change contained in the proposed regulations is its extension to workers at any pay rate. Departmental interpretation of the existing regulations has been that spread of hours, call-in and uniform maintenance pay all phase out as workers' pay rates rise above the minimum, or in other words, that they are offset by amounts paid above the minimum. Many employers have found this difficult to understand and/or unwieldy to calculate. In the case law, different courts have made different interpretations regarding whether or not spread of hours pay applies to workers at or near minimum wage only, or also to workers at higher pay rates. It is necessary to clear up the confusion and desirable to make it easier to calculate. The extension of spread of hours pay to covered employees at any pay rate does both. In recognition of the added burden of workdays of any length but spread out over a period of more than ten hours in a day, sometimes with added travel back and forth, this form of inconvenience pay remains relevant and appropriate. The Wage Board recommended its retention and extension and we are reluctant to disregard that.
COMMENT: Regarding charges purported to be gratuities on bills for banquets, special functions, and package deals, one commenter says the "rebuttable presumption" that "any charge in addition to charges for food, beverage, lodging, and other specified materials or services is a charge purported to be a gratuity" is overbroad and proposed instead that only charges explicitly for "gratuities" or "service" be presumed so.
RESPONSE: We are unwilling to say that only the terms "service" or "gratuities" are presumptively gratuities. Ways to suggest or imply or give the impression to a reasonable customer that a charge is for gratuities, tantamount to gratuities, a substitute for gratuities, or will be distributed to employees as gratuities, etc., are numerous and are not limited to two particular terms. The Wage Board recommended the broad language with its open possibilities, thus placing the obligation on the employer to make it clear if a charge is NOT for gratuities, which can easily be done.
COMMENT: Regarding charges not purported to be gratuities in banquets, special functions, and package deals, one commenter says that term "administrative charge" in the proposed regulations will not cover all possible charges; some are more appropriately classified as "overhead fees" or "operations charges" and there may be other terms as well.
RESPONSE: The Wage Board intended the term "administrative charge" to be a generic term. The wage order cannot list all the possible names for charges that might appear on a guest bill that might be construed by a reasonable customer to be for distribution to employees as gratuities, tantamount to gratuities, or a substitute for gratuities, unless accompanied by a notification to the customer that such charge is not a gratuity or tip.
COMMENT: Requiring customer notification that a charge is not a gratuity in 12-point font is too specific and cannot be accommodated on all marketing documents created in the industry, some of which are the size of a postcard and use text smaller than 12-point. Several commenters felt that "in the same font size as the surrounding text" was sufficient.
RESPONSE: 12-point font is quite small and the notice required is quite brief. To be effective, it does need to be quite noticeable rather than obscure. We think that the industry can accommodate such small notices on its advertising material, menus, bills and contracts, whenever such charges are listed or mentioned, and are keeping the 12-point font requirement.
COMMENT: One commenter wants it clarified that delivery charges are not charges presumed to be gratuities.
RESPONSE: We are reluctant to add delivery charges to the list of charges not purported to be gratuities, since we think many customers will presume they are paid to the worker as gratuities unless informed otherwise.
COMMENT: One commenter said the exclusion of food delivery workers from the food service worker category is fine but could leave the impression that they are excluded from tipped employees altogether and it should be clarified.
RESPONSE: The wage order excludes food delivery workers from the food service workers classification. However, the wage order cannot say that all food delivery workers will instead qualify as service employees; some may meet the definition while some may not.
COMMENT: One commenter objected to allowing employers to mandate tip pools and set the percentages that each occupation will receive from tip pools. This invites abuse by making it easier for employers to skim off the top while administering the pool. The commenter, however, thinks we can mitigate this by strict enforcement of the regulations and, if found necessary in the future, by promulgating additional tip pool regulations. Another commenter contends that mandatory tip pools will violate Section 196-d on its face, even if tips can be distributed only to certain classifications of workers.
RESPONSE: We think that in some, but not all, work settings, it is both impractical not to pool tips and impractical for the tip pools to be employee-run. The composition of the employee rosters, shift rosters, and service teams can vary constantly. Employees' starting times and lengths of work shift can vary. The production of tips can vary according to time of day, type of meals/beverages/snacks being served, and type of service being provided. Employees' work assignments or locations can vary during their shifts. When several occupations are employed in providing service, no single person who picks up the cash tip or charge slip from a table is the one for whom that tip is intended, or to whom it belongs. Practical means for allocating and disbursing the tip must be provided for. It would be possible, if foolish, to read Section 196-d on its face as prohibiting a group of employees from controlling a tip pool and engaging in the allocation of the tips not left for them alone.
COMMENT: Several commenters think it would be helpful for us to add sommeliers, maitre d'hotels, coffee persons, fromagieres and tea sommeliers to the list of occupations eligible to receive shares of tips or distributions from tip pools. They also urge us to add language stating that the list of occupations is not intended to be exhaustive. One commenter recommends that we add a clause that no manager can be included in the tip pool. Another commenter suggests using the term "non-management maitre d'hotels and sommeliers."
RESPONSE: The wage order (146-2.14) already is fairly clear that the occupations listed are examples only. The requirement in the wage order that "eligible employees must perform, or assist in performing, personal service to patrons that is a principal and regular part of their duties and is not merely occasional or incidental" should exclude persons performing managerial functions.
COMMENT: One commenter supports the employee notification requirement in order for the employer to take a tip credit, saying that this will block attempts at retroactive application of tip credits by employers whose illegal practices are challenged.
RESPONSE: So noted.
COMMENT: The 2 hours or 20% limitation on the amount of non-service work a food service worker can do in a day and still be classified and paid as a food service worker generated several comments. Several stated that the proposed language leaves it unclear whether the limits include the side work that food service workers traditionally do. One commenter claimed that a higher limit than 2 hours or 20% was needed in order to be reasonable. Several commenters noted the difficulty of tracking time spent on intermingled duties. Finally, several commenters noted that some food service workers want the opportunity to work another shift in a different occupation on the same day. Several commenters recommend allowing payment in accordance with the job being performed. One commenter recommends we explicitly exclude traditional side work from "work at an occupation in which tips are not customarily received," in which case the sidework would not count towards the 2 hours or 20%. Another suggestion is that we merely require that weekly tips be sufficient to permit the tip credit to be applied to all hours worked.
RESPONSE: The 2 hours or 20% limitation is intended to be sufficient to allow a reasonable amount of traditional side work before, during and after the period of customer service that produces tips on a single shift, while prohibiting excessive so-called side work or the assignment of a food service worker to other duties altogether while still paying the tipped rate. It is not intended to apply to dual jobs in one day when the jobs are distinct, are during separate shifts distinguished in the time records, the duties are not intermingled, and they are paid at the rate applicable to the job being performed. If the duties are intermingled, or no records show when the different duties are worked, then the 2 hour or 20% limit applies.
COMMENT: One commenter said the definition of a uniform is inadequate; "ordinary wardrobe" is open to various interpretations; the Department's intent in "permit variations in details of dress" is unclear. The commenter proposes that we expressly allow employers to prescribe a specific color, style, vendor, or all three so long as it does not bear a logo and is not of such extreme fashion that it would never be worn outside of work. The commenter urged us to allow employers to sell such garments to employees so long as the employer does not make a profit. Further, uniform maintenance pay should be premised on the items actually being laundered; for example, a tie or vest that does not need weekly laundering should not invoke the uniform maintenance pay. We should expressly state that uniform maintenance pay is not part of the regular rate for the purpose of calculating overtime. Another commenter asked us to define the number of uniforms considered "adequate" for the wash-and-wear exemption.
RESPONSE: To qualify as "ordinary wardrobe," the proposed wage order states that the employer must permit variations in details of dress (see 146-3.10). Any garment that an employer sells to an employee that the employer requires to be worn is a uniform garment and the employer must provide a sufficient number of such uniforms free of charge. We think it is well known that uniform maintenance pay is not part of the regular rate and we believe we have adequate educational efforts on the subject of the regular rate and overtime. How many uniforms are sufficient depends on the full set of circumstances.
COMMENT: One commenter asked that the wage order expressly state that employers can take meal credits so long as meals are legitimately offered; allowing the meal credit only if the meal is actually taken imposes an enormous record-keeping obligation on the employer.
RESPONSE: The definition in 146-3.7 should suffice: "Meals shall be deemed to be furnished by an employer to an employee when made available to that employee during reasonable meal periods and customarily eaten by that employee."
COMMENT: One commenter says the deductions and expenses section needs to include deductions for the benefit of the employee as allowed deductions, such as for health insurance and 401(k) plans.
RESPONSE: Deductions voluntarily authorized by the employee for benefits or savings plans similar to the examples given in the law are permitted by Labor Law Section 193 and so would be permitted by Part 146-2.7 as "deductions authorized … by law."
COMMENT: Several commenters recommended that the wage order permit the payment of credit card tips through the payroll for the week in which the tips were earned. It is unsafe for employers and employees to carry or handle large amounts of cash; it is difficult for tipped employees to participate in benefits such as health insurance and 401(k) plans if credit card tips are required to be paid out to them in cash daily and cannot be run through payroll, as there is not enough money in their net pays to allow the necessary deductions; the employee loses the ability to take advantage of paying for benefits with pretax income as permitted by federal law; net pay doesn't always cover the employee's mandatory taxes; putting credit card tips on the paycheck better promotes accuracy of tip reporting to the tax authorities; not doing so leaves employees with a greater burden in accounting for their tips and paying any taxes owed that were not covered by the withholdings from wages; it will be difficult to comply with the forthcoming Health Care Reform Act provisions if not allowed; employers in financial distress have an added burden of paying tips out daily in cash while they do not normally receive credit/debit card funds in their bank accounts for several days following the transaction.
RESPONSE: We are not amending the wage order at this time by adding a provision permitting employers to pay out credit card tips in the paycheck. However, the Department will review its policy on this issue in the near future.
COMMENT: Prohibiting expenses that bring an employee's wages below the minimum is too narrow under Section 193. The Wage Order should require that employers reimburse any expense that is required in order to carry out duties assigned by the employer.
RESPONSE: This can be a topic for consideration at a later time.
COMMENT: There were several comments in support of, and no objections to, requiring hourly rates to be paid to all non-exempt employees (except commission salespersons). Several commenters also supported the new treatment of non-hourly pay as only covering the first 40 hours, with full overtime pay due for any hours over 40. One commenter objected to this provision because it increases costs to business and hurts jobs.
RESPONSE: To the objection, we say that the cost of keeping hours records under both the old and new regulation is the same and the cost of wages owed can be the same. Under both the old and new regulations, employers are required to keep true and accurate records of daily and weekly hours worked and retain such records for six years, regardless of whether the worker's pay is based on hours worked. Further, the requirement to pay an hourly rate plus overtime can be neutral regarding the cost to business. A salary can be converted to an hourly rate plus overtime at 1½ times the hourly rate for the average number of hours worked by the employee. The employee's pay will then fluctuate in accordance with hours worked, but the employee's total earnings in the course of a year can be approximately the same. Only if a business does not comply with the new law and fails to pay an hourly rate plus overtime does the new regulation make it more costly for the employer, as the employer will owe more back overtime pay under the new regulation than under the old one.
COMMENT: One commenter asked that we expressly clarify that a blended rate calculation can be used when an employee works dual jobs at dual pay levels and that we give an example. Another commenter asked that we illustrate how overtime is calculated for a banquet server and how service charges and/or amounts purported to be a gratuity are included.
RESPONSE: A number of examples with different fact sets could be added to the wage order. While we have given some basic examples in the wage order, we think it best not to add more. The proposed wage order states that any charge for "service" will be considered a charge purported to be a gratuity. The calculation of the banquet server's overtime will depend on whether or not the employer takes a tip credit in paying the banquet server. The two examples already given in 146-1.4 illustrate how to calculate overtime with or without a tip credit.
COMMENT: One commenter requests the wage order expressly allow electronic notices and electronic acknowledgments of receipt.
RESPONSE: The wage order is not the best place to cover that particular subject.
