February 17, 2011

Restaurants and Hotels in New York: Immediate Action Required DOL Part 146 Implements New Wage Standards for Restaurateurs and Hotels

Restaurants and Hotels in New York: Immediate Action Required DOL Part 146 Implements New Wage Standards for Restaurateurs and Hotels Tax & Business

The New York State Department of Labor’s Hospitality Wage Order, effective January 1, 2011, impacts numerous wage oriented mandates for employers in the restaurant and hotel industry. With the intent of promoting health, efficiency and overall well-being of employees and their families, the Hospitality Wage Order revises certain wage and benefit standards to ensure a stable work environment for hospitality workers. The following outline provides the significant changes that employers must comply with on or before March 1, 2011.

Hourly Wages
The total minimum hourly rate remains at $7.25 per hour for tipped employees, but the breakdown is changed as follows:

Type of Employee Minimum Wage 1/1/2011 Maximum Tip Credit 1/1/2011 Minimum Wage Prior to 2011 Maximum Tip Credit Prior to 2011
Food Service Workers $5.00 $2.25 $4.65 $2.60
Service Employees in All Establishments $5.65 $1.60 $5.56or$4.90 $1.60 or $2.35
Service Employees in Resort Hotels if Tips at least $4.10/hour $4.90 $2.35 $4.35 $2.90
Chambermaids in Resort Hotels $4.90 $2.35 $6.15*






*If tips between $1.10-$4.10 per hour
**If tips more than $4.10 per hour

Overtime Rates
Employers must pay overtime at a rate of 1½ times the employee’s regular hourly rate for hours worked in excess of 40 hours per week. The overtime rate must be calculated using the employee’s regular rate before subtracting any tip credit, multiplied by 1½, less the tip credit. It is a violation of the overtime requirement to subtract the tip credit first.

Call in Pay
Employees who report to work for an unscheduled shift, whether by request or permission of the employer, must be paid at their respective wage rate for the duration of the lesser of the employee’s regular shift or

  • At least three hours for one shift,
  • At least six hours for two shifts totaling six hours or less, or
  • At least eight hours for three shifts totaling eight hours or less.

The Department of Labor defines a regularly scheduled shift as a fixed and repeating shift normally worked by the employee on the same day each week. Call in pay may not be offset by credits for meals or lodging to the employee and is applicable to all employees, regardless of their regular rate of pay.

Spread of Hours
If the length of time between the beginning and end of an employee’s workday exceeds ten hours, including time off for meals plus intervals off duty, the employee shall receive one additional hour of pay at their regular hourly rate. The additional hour of pay cannot be offset by credits for lodging or meals and may not be used in the calculation of overtime pay.

Credits for Meals and Lodging for Unemployment Insurance Tax Purposes
The reasonable cash value of board, rent, housing or lodging is taxable and must be reported for unemployment insurance tax purposes. An employer may not report a lower cash value for meals and lodging than the value placed on them in complying with minimum wage orders. The New York Hospitality Wage Order indicates that the credits for this computation shall be valued as follows:

Meals furnished by an employer may be valued at a credit of no more than $2.50 for all types of workers. Only one meal credit is permissible for employees working less than five hours per day. Lodging credits in restaurants shall be valued at no more than $1.50 per day for food service workers and $1.75 per day for all other workers (capped at $9.60 per week for food service workers and $11.30 per week for all other workers). Lodging furnished by an employer to an employee in an all-year hotel may be valued at no more than 35 cents per hour. Lodging furnished by an employer in resort hotels for 3 meals a day shall be valued at no more than $13.75 per food service worker per day and $16.25 for all other workers per day. Nonresidential employee meals shall be valued at $2.75 per meal on workdays for food service workers and $3.25 per meal for all other workers.

Employee Tips
When tips are charged on credit cards, employees are charged with the pro-rated share of the service charge taken by the credit card company for processing of the tip. Employers must return to the employee the full amount of the tip charged on the credit card, less the pro-rated portion of the tip taken by the credit card company.

Top Pooling
Employees who are directly tipped may voluntarily agree to pool their tips and redistribute the tips among directly and indirectly tipped employees. An example of a directly tipped employee is a waiter or bartender. An indirectly tipped employee is a bus person or a barback. Eligibility of employees to receive shared tips must be based upon duties, not titles. Eligible employees must perform or assist in duties that are regularly part of their responsibility. Eligible employees include waiters, counter personnel, bus persons, bartenders, service bartenders, barbacks, food runners, captains and hosts.

Employers may require employees to participate in a tip pool and may set the percentage to be distributed to each occupation from the tip pool in a reasonable manner. Employers who do this must establish, maintain and preserve a log for six years that includes the following information:

  • A daily listing of the tips collected by each employee on each shift by any means of payment
  • A list of occupations that the employer deems eligible to receive tips through a pooling system
  • The shares of tips that each occupation is scheduled to receive
  • And the amount in tips that each employee receives from the tip pool.

Records of the above information must be readily available for inspection by all employees included in such a pooling system.

Tipping and Non-TIpping Roles on the Same Day
Employees who work in a non-tipping role for two hours or more of their total work day, or for more than 20% of their total shift shall have no wages subject to the tip credit for that day.

Administration Fees
Charges for administration fees of a banquet, special function or package deal must be clearly identified to the customer in the contract, menu, or receipt. A clause must explain that the applicable fees are for administrative fees of the function and will not be distributed to employees as gratuities for service provided to the guests. This must be clearly written in language ordinarily understood by a prudent person in a text size and font uniform to the rest of the contract, menu or receipt and may be no smaller than size 12 font. It is the employer’s responsibility to demonstrate by clear and convincing evidence that this notification of fees was clearly expressed to the customer as an administrative charge, not a gratuity for employees.

Wage Deductions
Employers are prohibited from taking the following deductions from employee wages:

  • Deductions for spoilage or breakage
  • Deductions because of non-payment by a customer
  • Deductions for cash shortages and losses
  • Deductions for fines and penalties for lateness, misconduct or resigning without notice.

Employees who are required to wear uniforms must be reimbursed for the cost of the uniform in the paycheck following the purchase. If employers offer laundering of uniforms at a normal and reasonable frequency, free of charge, employees may not request reimbursement for laundering on their own. Restaurants or hotels who do not launder uniforms for the employees must pay the following to employees for maintenance of the uniforms:

  • $9.00 per week for employees who work more than 30 hours per week
  • $7.10 per week for those who work more than 20, but less than 30 hours per week
  • $4.30 per week for those who work less than 20 hours per week.

If required uniforms are made of “wash and wear” materials that may be routinely washed and dried in the normal course of laundering by the employee, the employer need not pay maintenance fees to the employee. Uniform maintenance pay may not be offset by any credits for meals or lodging provided to the employee.

Because of the required record keeping changes for employers, the Department of Labor has granted employers until March 1, 2011 to be in compliance. It is important to note that employees are entitled to the changes in wage rates and other pay as of January 1, 2011. As it is the employer’s responsibility to make any payroll and record keeping changes to comply with the Order, the Department of Labor encourages employers to do so as fast and efficiently as possible. All retroactive pay owed to employees for the period January 1, 2011 through February 28, 2011 is due to the employee March 1, 2011 or in the first paycheck following that date.

Please consult your Marcum LLP Tax Professional today with any questions or concerns regarding how these changes might affect your business today.

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