Employee Wages & Tips

What is the Spread of Hours Law?

Title 12 of the New York Codes, Rules, and Regulations (NYCRR) §142-1.6 is a law that requires employers to pay any employee an extra hour of pay, at the basic minimum hourly rate, for any day on which the employee’s “spread of hours” exceeds 10. The spread of hours is defined as “the length of the interval between the beginning and end of an employee’s workday.”  Essentially, if an employee’s “punch in” and “punch out” time exceeds 10 hours on any given day, even if that employee left the restaurant or hotel for a 6-hour lunch and only actually worked 5 hours that day, the employer must pay them for an extra hour.  The additional hour of pay “is not payment for time worked or worked performed” and does not need to be included in the regular rate for the purpose of calculating overtime pay.
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I was charged a 20% ‘service fee’ for a private dining event in New York City. Is this type of fee permissible under New York law? 

Beginning in July, 2013, the New York Attorney General’s Office began to examine the operating structure of the luxury restaurant Per Se, located on Columbus Avenue, New York, New York. According to the factual allegations, the restaurant was attaching a significant “service fee” to the final bill for private dining services amounting to 20% of the entire check. On the service agreement, the service fee was not explicitly described, and most patrons believed it to be a fee included to ensure proper gratuity was paid to the wait staff scheduled to work the event. In reality, however, the 20% fee – which was presumably sizable considering the $310.00-per-plate prix fixe menu – was used for daily operational costs of the restaurant, and was in no way paid to the wait staff for any private event scheduled by the restaurant.

I am considering opening a restaurant in Manhattan. What are some compliance issues I should consider?

Owning a successful restaurant in New York City is tough, especially given the stiff competition and crabby critics. However, one area that need not be a headache is city and state compliance, The administrative regulations that apply to bars and restaurants are lengthy and detailed. If you are considering opening a restaurant in New York City, a restaurant and bar lawyer can help you better understand some of the most common pitfalls in regulatory compliance, including:

Wage and hour issues are common in the restaurant business.  With the complexity of the wage and overtime laws and spotty enforcement, many restaurant owners do not even know they are committing a violation.  There has been an explosion of wage and hour stories covered by news outlets in recent years.  Due to the enhanced awareness of wage and hour laws, there has been an increase in labor and employment lawsuits focusing on these issues, especially by those in the restaurant business.  An example is a recently filed suit against a famous upscale New York City restaurant.

Le Cirque restaurant caters to royalty, politicians and celebrities of every caliber.  With sky-high prices and white glove service, allegations of cheating employees out of wages may come as a surprise to some.  Former employee, Elvis Pena, claims he worked in various positions at Le Cirque including runner, bus boy and waiter and that during this time, he was not paid minimum wage.  Although he worked well over 40 hours a week, Pena claims that the restaurant did not pay him overtime wages.  He also asserts that he was forced to pool his tips with other employees and share these tips with captains, who are considered management, in violation of state and Federal labor laws.

Restaurant workers are paid in a number of different ways.   Usually, employees that do not have the opportunity to make tips, such as managers, hostesses and kitchen staff, are paid a salary or an hourly wage that is at or above the required state and Federal minimum wage.  Those that do have the ability to make tips, such as servers, bartenders and sometimes bus boys, are paid at an hourly rate that is below minimum wage.  The thought is that by collecting tips the workers will make at least the minimum wage if not surpassing it.  If the employee does not make at least as much as they would if being paid minimum wage, the employer is required to make up the difference.

Now, New York State service workers might be getting a raise.  Service workers include restaurant workers that make tips.  Various groups, including labor unions and service worker organizations, are pushing for these parties to be paid at least minimum wage, even if they are tipped.  They have submitted their pleas to state officials and it is now up to the state wage board to make a recommendation.  Once the board makes a recommendation, the New York State Labor Commissioner is responsible for making a final decision, which is expected in February of 2015. 

As of April 1, New York City restaurant workers have a financial safety net if they have to miss work because they're sick or have to care for a sick family member.

This is great for the employees receiving this type of compensation for the first time, but, how will the new sick leave law affect NYC restaurant owners?

Shiv Puri, owner of Manhattan's Bombay Sandwich Company, was concerned about the cost when he first heard about the law. However, after calculating costs and receiving more information, he is now confident about this new measure ,The New York Times reported. Puri said his eight employees were excited about this news, he said "It’s the law and it’s the right thing to do. It won’t bust the bank. It won’t put us (the business) in jeopardy.”

Puri pays his workers $10 an hour, which is $2 more than the state minimum wage rate, and considers himself a progressive employer, but as we stated, he was worried that the newly enacted regulation would negatively affect his business.

Some important things to note about NYC sick leave law:

Have you heard of “Spread of Hours” pay? It is a law unique to New York and greatly affects the restaurant industry, but it is not well-known. Recently, employees of the chain restaurant Planet Wings sued their employer for failing to comply with the spread of hours mandate imposed by New York law. You, too, could be liable to certain employees who meet hour requirements.

“Spread of hours” pay is an extra hour of pay that must be paid to employees when an employee’s workday is “spread” over 10 hours. For example, if a waiter works a morning shift from 10am – 3pm and then returns later in the day to work an evening shift from 6pm – 10pm, he has worked a total of 9 hours “spread” over a 12 hour period and would be entitled to an additional hour of pay at the minimum wage. This additional hour of pay is not for work performed.

With the start of the New Year, business owners are facing big changes as the minimum wage increase takes effect. Effective December 31, 2013, the minimum wage is now $8.00 per hour up from $7.25. The minimum wage will continue to increase over the next two years, going up to $8.75 in 2015, and then up to $9.00 per hour in 2016.

In addition to changes in the minimum wage, restaurant owners will be affected by changes in tip credits, overtime rates, meal allowances, and uniform allowances.

In the United States, 13.1 million workers are in the food service industry – waiters, waitresses, managers, entrepreneurs, franchisors, franchises, and business leaders. In New York, restaurants are a driving force of the economy employing 8 percent of New Yorkers.If you work in the restaurant business, you are probably familiar with the many employment law issues that exist in the industry. Employers are regularly sued for alleged violations of wage and hour laws to those that do not even exist.

Over the past year, more and more suits have been brought against employers regarding that handling of tips. A tip, or “gratuity,” is money given to an employee by a customer for a service provided. Any charge to the customer, other than food, beverages, lodging, or specified good, is a tip and must be given to the employee. All private sector employers and employees are subject to the provisions governing tips in New York, including the Hospitality Wage Order.

One of the most important areas of law which restaurant owners have to contend with is labor and employment. In New York City in particular, restaurant owners and operators find it challenging to keep up with the myriad of federal state and city regulations that apply to their establishments. Working with an attorney that has experience and expertise in these issues can help you stay in compliance and out of legal hot water. 

Due to the recession, New York State, like many other states, was forced to borrow from the federal government to sufficiently fund unemployment benefits for eligible recipients. Employers must now repay, with interest, all federal monies borrowed. The federal government will collect this money from employers through higher Federal Unemployment Tax Act (“FUTA” – which employers already contribute to) rates and interest assessments.  For these reasons, unemployment insurance reform was needed and has already started to take effect. 

Before I discuss the recent changes, it is important to have a general understanding of unemployment insurance in New York.  As you may know, employees who lose their jobs through no fault of their own may be eligible for unemployment insurance, which is funded by contributions from the employer. Employers in New York pay two types of unemployment insurance contributions: (1) The Federal Unemployment Tax Act (“FUTA”), and (2) the New York State Unemployment Insurance contribution.  The New York State Unemployment Insurance fund is responsible for paying weekly benefits to eligible recipients. However, as previously discussed, the state fund is currently insolvent. The following changes went into effect on October 1, 2013 and were created to help New York State pay back the federal government faster, saving employers from paying an additional $200 million in interest payments.