Originally published January 2005
While it’s not likely that the New York Yankees’ losing the American League pennant to the Boston Red Sox had anything to do with the state’s minimum wage, the legislature did take the matter in hand. The Empire State Wage Act of 2004 increased the minimum wage in the state of New York to $6.00 per hour beginning on January 1, 2005. The state law was passed when the New York Senate voted to override the Governor’s veto in an unusual December session.
This bill will have an even larger impact on the hospitality industry than other industries in New York, since the bill not only covers increases to the regular hourly wage rate, but also to the wage rate of food service workers receiving tips. The increases are scheduled in steps which will go into effect on the first day of the year in 2005, 2006 and 2007. However, with the passage of the Act occurring just weeks before the new year, it is imperative to make sure that your company is compliant with the new rates as of January 1, 2005.
The increase in minimum wage will obviously increase operating costs for hospitality employers, and care should be taken in factoring in the new costs in your annual budgets and projections. Not only will the costs of straight time be a factor, but paying overtime at 1.5 times the regular rate must be considered in your financial planning as well. Unionized environments may have to deal with any bargained-for percentage increases coming on top of the state-mandated yearly increases to the minimum wage.
Increases in the minimum wage will be as follows:
- on and after January 1, 2005, raise the hourly wage from the current federal and state minimum wage rate of $5.15 to $6.00 per hour
- on and after January 1, 2006, raise the minimum wage rate to $6.75 per hour
- on and after January 1, 2007, raise the minimum wage rate to $7.15 per hour
If the federal minimum wage is increased above these rates during those times, then the greater federal rate will prevail.
Increases in the wage for food services workers receiving tips will be effective as follows:
- on and after January 1, 2005, the minimum hourly tip wage will increase from $3.30 to $3.85
- on January 1, 2006, the minimum hourly rate will become $4.35
- on January 1, 2007, the minimum hourly rate will become $4.60
The increases also affect the tip allowance, uniform maintenance rate, per meal allowance, and lodging allowances in each of the hotel and restaurant industries. The state of New York has issued Wage Orders in both industries covering these new minimum amounts.
An employer who violates the minimum wage law in New York is subject to criminal prosecution – it is a class B misdemeanor – as well as civil and other penalties. In addition to paying the minimum wage underpayments, a violating employer may have to pay interest, attorneys’ fees, and liquidated damages equal to 25 percent of the total underpayment if such underpayment is willful. Each payment to any employee in any week of less than the state minimum wage constitutes a separate offense.
Implementation of these changes effective with the new year, particularly in those situations where employees are covered by a collective bargaining agreement, requires careful review and scrutiny. While the ball club in New York will be paying penalties for going over the maximum salary cap, New York employers will avoid penalties by complying with the new increase to the state minimum wage rate. Though the Yankees may be willing to pay the price to make up for a disappointing loss in 2004, your New York team’s failure to comply could be a painfully expensive start to a new year.
The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.