On December 31, 2019, the Commissioner of Labor proposed an amendment to New York’s minimum wage regulations, phasing out tip credits for New York employees in certain industries.
What Employees are Covered by the Miscellaneous Wage Order?
The miscellaneous wage order defines its coverage as those employees that do not fall under a different minimum wage order. The miscellaneous wage order essentially covers all businesses, except for employers in hospitality, agriculture, not-for-profits that have exempted themselves from coverage under the wage order, and building service. A few examples of covered employees include, but are not limited to, nail salon workers, hairdressers, aestheticians, car wash workers, valet parking attendants, door-persons, and tow truck drivers.
What Is The Law Currently?
New York State has continued to phase in annual increases to the minimum wage since December 31, 2016, differing based on employer size and geographic location. Additionally, employees in certain industries are subjected to a subminimum wage, meaning the employees in those industries are paid below minimum wage by their employers and earn the remainder of the minimum wage through tips from customers.
The miscellaneous industries wage order has an exceedingly complex tip credit system according to the Subminimum Wage Report and Recommendations released by the Department of Labor. Essentially, an employee’s tip credit is based on a three-tiered system, depending on whether the tipped employee’s average weekly tip earnings are below the tip credit on the low scale, fall between the tip credit of the low scale and high scale, or exceed the high scale.
What is Changing?
Effective June 30, 2020, the difference between the minimum wage and current tip wages will be cut in half and on December 31, 2020, the tip wage will be eliminated in its entirety for workers in the miscellaneous industries. It is important to note that the change in law solely affects employees covered by the miscellaneous industries wage order, and does not affect tip credits of employee that work in the hospitality industry (e.g. hotels and restaurants).
What to do Next?
Governor Cuomo already announced that he would implement the Commissioner’s recommendation. Employers with employees covered in the miscellaneous industries are advised to review their current pay practices and prepare to implement the above-mentioned changes to their tip credits on June 30, 2020 and December 31, 2020. Businesses should further adjust their budgets based on anticipated increased labor costs due to this change in the law.
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