Wage & Hour Defense Blog : Wage & Hour Lawyer & Attorney : Epstein Becker Green Law Firm : DOL Enforcement, FLSA Coverage

EBG colleague Susan Gross Sholinsky recently prepared an Act Now Advisory discussing New York State’s December 21, 2010 opinion letter regarding whether an internship will qualify for an exception to applicable minimum wage rules. The New York State Department of Labor utilizes the United States Department of Labor’s six-step test, but adds an additional five factors to determine whether the internship will be exempt from minimum wage rules. In order to qualify for the exemption, the following eleven factors must be satisfied:

1. The training, even though it includes actual operation of the facilities of the employer, is similar to training that would be given in an educational environment.

2. The training is for the benefit of the intern.

3. The interns do not displace regular employees and any work they may do is under close supervision.

4. The employer who provides the training derives no immediate advantage from the activities of the trainees or students and, on occasion, operations may actually be impeded.

5. The trainees or students are not necessarily entitled to a job at the conclusion of the training period and are free to take employment elsewhere in the same field.

6. The trainees or students have been notified, in writing, that they will not receive any wages for such training and are not considered employees for minimum wage purposes.

7. Any clinical training is performed under the supervision and direction of individuals knowledgeable and experienced in the activities being performed.

8. The trainees or students do not receive employee benefits.

9. The training is general, so as to qualify the trainees or students to work in any similar business, rather than designed specifically for a job with the employer offering the program.

10. The screening process for the internship is not the same as for employment, and does not appear to be for that purpose, but involves only criteria relevant for admission to an independent educational program.

11. Advertisements for the program are couched clearly in terms of education or training, rather than employment, although employers may indicate that qualified graduates may be considered for employment.

For additional information and analysis, please click on the link to the Act Now Advisory.

By: Kara Maciel

Following up on our previous blog posting from November 2, 2010, on December 16, 2010, the New York State Department of Labor issued a new minimum wage order (the “Order”) which will bring immediate changes to the restaurant and hotel industries. Under the Order, employees will be due a higher minimum wage and subject to new tip pooling rules. Meanwhile, employers will need to comply with more stringent recordkeeping requirements. Although employers have until February 28, 2011, to adjust their payrolls, they will still owe their employees back pay as of January 1, 2011. Important highlights include: 

Higher Minimum Wage for Tipped Employees: 

·        Food service workers must earn at least $5.00 per hour and no more than $2.25 per hour in tip credits; however, the total of tips they receive plus their hourly wages must still amount to the federal and state minimum wage of $7.25 per hour

·        Service employees (at non-resort hotels) must earn at least $5.65 per hour and no more than $1.60 per hour in tip credits; however, the total of tips they receive plus their hourly wages must amount to the federal and state minimum wage of $7.25 per hour

·        Service employees (at resort hotels) must earn at least $4.90 per hour and no more than $2.35 per hour in tip credits; however their weekly average for tips must amount to at least $4.10 per hour  

Mandatory Tip Pooling is Permitted  

·        Employers may require food service employees to pool tips with co-workers

·        Employers may establish the percentage of pooled tips to be distributed to each occupation

·        However, only “food service workers” may receive distributions from the tip pool, e.g., wait staff; counter personnel who serve food or beverages to customers; bus persons; bartenders, including service bartenders; barbacks; food runners; captains who serve food directly to customers; and hosts who greet and seat guests 

No More Set-Off of Wages Paid in Excess of Minimum Wage: 

·        Employers must pay an additional hour at the rate of minimum wage for each hour the employee works beyond 10 hours per day, regardless of whether the rate of pay for the first 10 hours is above the minimum wage 

Non-Exempt Employees Must be Paid an Hourly Rate of Pay: 

·        All non-exempt hospitality workers (except commissioned salespersons) must be paid on an hourly basis, i.e., no non-exempt salaried workers

·        In calculating the overtime rate of pay, employers no longer may subtract an employee’s tip credit from the regularly hourly rate of pay and then multiply the reduced rate by one and one half; instead, employers must calculate the overtime rate based upon an employee’s full hourly rate 

Employers Must Keep the Following Records for Six Years: 

·        Amount in tips contributed by each employee during each shift (cash and credit)

·        Amount in tips collected by each employee by date (cash and credit)

·        Occupations eligible for tip pooling and each occupation’s respective percentage of the tip pool 

Clarification as to “Service Charges:” 

·        Employers may retain fees identified as “service charges” if, and only if, they clearly explain to customers that such charges are not distributed to service employees 

The Order imposes several important requirements, but unfortunately, leaves employers with a very short amount of time to implement the necessary changes to their payroll and recordkeeping methods. Despite having until February 28, 2011, to comply with the Order, employers will be best served by taking immediate action to bring their businesses in compliance with the new regulations. The interim period during January and February should be utilized to ensure proper records are kept and that an employer’s tip pool is not shared with ineligible individuals. Finally, the bullet points above represent only a portion of the changes under the Order, and employers should become familiar with the entire regulation before the end of the grace period.