Know Your Rights Under the New York State Hospitality Industry Wage Order

By Susan T. McNeil, Esq.

On March 1, 2011, the New York Department of Labor implemented the Hospitality Industry Wage Order [“HIWO”]. The HIWO is a complex group of multifaceted provisions that establish a wide variety of wage and hour rules for the hospitality industry. This is the first installment of a series of blog posts aimed at helping hospitality workers understand their rights under the HIWO and how to figure out if their employer is playing by the rules. Up first is an explanation of which employers and employees are covered by the HIWO and an explanation of the interaction between the minimum wage and the “tip credit” used by many employers to offset wage costs.

Which employers must follow the Hospitality Industry Wage Order?

Every New York employer in the “hospitality industry” must abide by the HIWO. The hospitality industry is defined to include both “restaurants” and “hotels.” Restaurants include any eating or drinking establishment that prepares and offers food or beverage for human consumption either on its premises or by catering, banquet, box lunch, curb service or counter service.  The term hotel is broadly defined to include commercial hotels and motels, resorts, camps, and dude ranches, among other facilities.

What Hospitality Industry Workers are covered by the Hospitality Industry Wage Order?

“Food service workers” and “service employees” who are paid hourly and work for a covered restaurant or hotel, as described above, benefit from the HIWO. Under the HIWO, a food service worker is someone that serves food and drinks to guests and regularly receive tips. This includes servers, bartenders, and bussers.  A service employee, according to the HIWO, is someone that is not a food service worker but nonetheless customarily receives tips. This includes “to-go” expediters and host/hostess, but generally not delivery drivers. Other hourly restaurant employees, such as kitchen and maintenance staff, are considered “non-service employees,” and are not covered by the HIWO. Employees who work for the Federal, State or municipal government and those who work in an executive, administrative or professional capacity are not covered by the HIWO.

What is the “tip credit” and how does it affect my hourly rate of pay?

If you are a food service worker or a service employee working in the hospitality industry in the State of New York, you must be paid at least the minimum hourly wage for all time worked up to 40 hours per week. You become eligible for overtime pay at the rate of 1.5 times your regular hourly rate, be it the minimum hourly wage rate or otherwise, if your work week exceeds 40 hours. Effective December 31, 2020, the minimum wage in Long Island and Westchester County, New York is $14.00/hour, and $12.50/hour for the rest of the state except New York City [“NYC”] where the minimum wage is $15.00/hour.

The HIWO “tip credit” provision allows your employer to reduce its out-of-pocket wage expenditure by subsidizing your hourly wage rate with the tips you earn during your shift. It is important to understand that the tip credit does not relieve your employer from its obligation to pay you at least the minimum hourly wage for 40 hours of work in a week or from paying you 1.5 times your hourly rate for hours exceeding 40 during a work week.

Here is an example of how the tip credit works:

You currently work as a server at a restaurant on Long Island or in Westchester County earning the appropriate New York state minimum wage of $14.00/hour for each hour you work up to 40 hours in a week. Under the HIWO, your employer can pay you $9.35/hour and claim a tip credit of $4.65/hour to get you to the minimum hourly wage threshold of $14.00.  However, if your tips do not average out to $4.65/hour during your shift, your employer must cover the shortfall so that you earn the minimum hourly wage of $14.00. If business is slow and, as a result, tips earned during your shift do not average at $4.65/hour, your employer must make up the shortfall by reducing the tip credit and increasing your hourly rate from $9.35 so you earn minimum wage.

The same principle applies in the rest of New York State, but the amount of the allowable tip credit varies. In the remainder of New York, except NYC, the allowable tip credit is $4.15/hour provided you earn tips of at least that amount on average during your shift, so tips combined with the employer’s share of the minimum wage ($8.35/hour) gets you to the minimum wage of $12.50/hour.  In NYC, the allowable tip credit is $5.00/hour provided you earn tips of at least that amount, so tips combined with the employer’s share of the minimum wage ($10.00/hour) gets you to the minimum wage threshold of $15.00/hour.

Reviewing your weekly pay stub is the best way to determine if your employer is taking unfair advantage of the tip credit. If your gross wages ((hourly rate) x (hours worked) + tips for the week) divided by the number of hours worked is less than minimum wage, it is possible that your employer has violated the HIWO.

If your employer is subject to the HIWO and you suspect a compliance issue, you should contact an attorney or the New York State Department of Labor.

By Diane Williamson

The gender wage gap refers to the difference in earnings between women and men. Experts have calculated this gap in different ways, but the varying calculations point to a consensus: women on average earn less than men, and the gap is wider for women of color. It is illegal to pay an employee who is a member of a protected class (like gender or race) less than other workers who perform substantially similar work, but enforcing equal pay laws is difficult.

The statistic that women make only 81 cents for every dollar a man makes is slightly misleading.[1] Yes, overall, the average pay for men and women differs to that extent—and the gap is even greater if you consider women of color compared to White men. Nevertheless, simply looking at averages does not tell us much about the causes. It might be that women choose to work fewer hours than men do or that our society does not value careers that are traditionally held by women as highly as careers traditionally held by men.

The more important statistic is the controlled gender pay gap, which was 98 cents for every dollar in 2020.[2] In other words, on average a woman makes 98 cents for every dollar a man makes—doing the same job. Of course, some careers have a greater controlled pay gap than others. (Oddly, female anesthesiologists suffer the greatest pay disparity compared to their male counterparts.)

Do not dismiss the importance of two cents! Over the course of her career, the median woman will earn almost a million dollars less than the median man performing the very same work. You can see why legislators, past and present, attempt to address this stubborn disparity.

At the federal level, in 1963, the minimum wage provision of the Fair Labor Standards Act was amended to include the Equal Pay Act (EPA). Congress’s purpose in enacting the EPA was to remedy what was perceived to be a serious and endemic problem of employment discrimination in private industry, namely the fact that the wage structure of “many segments of American industry has been based on an ancient but outmoded belief that a man, because of his role in society, should be paid more than a woman even though his duties are the same.” S. Rep. No. 176, 88th Cong., 1st Sess. 1 (1963).

The solution adopted was quite simple in principle: to require that equal work be rewarded by equal wages. While there have been successful Equal Pay Act suits, especially because there is no need to show an intention to discriminate, in general it is difficult to show that the two jobs are “substantially equal.”

In evaluating whether one employee makes less money than others of the opposite sex for “substantially equal” work, a court will consider the required skills, effort, responsibility, and working conditions. The lesser paid employee often has trouble pointing to other employees whose jobs are similar enough. For example, one U.S. Court of Appeals decision found that professors in different departments at the same University did not perform “substantially equal” work.[3]

At the end of January, the Paycheck Fairness Act was introduced into the House of Representatives. The bill includes many proposals to strengthen the EPA. One of the most important is the broadening of the requirement that the two jobs be at the same “establishment.” Under the current law, “establishment” by and large means the same physical space, which excuses many cases of obvious pay disparity simply because the workers work at different locations. The Paycheck Fairness Act would broaden the definition of “establishment” to include locations within the same county.

Another important change would be a protection against retaliation for employees who discuss wage and salary rates. Common sense tells us that most employees cannot even consider bringing an EPA claim because they have no idea what their coworkers are paid. Arguably, a law that would put the onus on employers to be transparent in their pay practices would go even farther to resolve this problem.

Passing the Paycheck Fairness Act would help, but it would not eliminate the inherent difficulty imbedded in the EPA of demonstrating that two workers perform substantially equal work.

In New York, a trio of amendments passed in 2019 strengthened the state’s equal pay protections. More specifically, the amendments 1) prohibit wage discrimination based on any protected class, not just gender, 2) extend the equal pay law to protect public employees, and 3) ban employers from making an applicant provide salary history as a condition of employment.[4]

The controlled gender pay gap has not changed since 2016, but the uncontrolled pay gap—as wide as it is—seems to be shrinking every year. Hopefully, these legislative changes—as minor or technical as they may seem—will keep us moving in the right direction.

[1] https://www.payscale.com/data/gender-pay-gap

[2] https://www.payscale.com/data/gender-pay-gap

[3] Spencer v. Virginia State University, 919 F.3d 199, 204-5 (4th Cir. 2019)

[4] If passed, the Paycheck Fairness Act would also prohibit employers from inquiring about the wage history of an applicant. The logic is that if an applicant has experienced pay discrimination in the past, inquiries into wage history only repeat that discrepancy.

By Diane Williamson

Please note that the information contained in this post is for informational purposes and is not to be considered legal advice. This blog post does not create or imply an attorney-client relationship. If you would like to discuss your particular circumstances with us, please set up a consultation by contacting the Satter Ruhlen Law Firm at 315-471-0405 or through our website (https://www.satterlaw.com/contact-us/). We look forward to walking you through your workplace rights.

This month our office is taking part in the Racial Equity Challenge sponsored by the New York State Bar Association. Anyone can participate (no law degree required): https://nysba.org/racialequitychallenge/. In taking part in the Challenge, I have been thinking about different types of racism, e.g., systemic racism, implicit bias, etc. Sometimes from a white perspective, it seems like overt racism is largely over, but what better context than employment discrimination to make us realize that overt racism is still very much alive in the United States.

In 1964, with Title VII of the Civil Rights Act, the federal government made employment discrimination based on race (and color, religion, sex, and national origin) illegal. Nevertheless, studies show that racist employment practices still exist. Most people are familiar with the study that demonstrated that identical resumes were 50% more likely to get an interview when the name at the top sounded like a white person’s name instead of a black person’s name. A 2017 study found that racist hiring practices have changed little since 1990.

In the landmark case Rogers v. EEOC, the Fifth Circuit Court of Appeals held that the practice of racially segregating patients in a doctor’s office could amount to discrimination in the terms, conditions, or privileges of employment, thereby violating Title VII. 454 F.2d 234 (5th Circ. 1971), cert. denied, 406 U.S. 957 (1972). The principal opinion in the case concluded that employment discrimination was not limited to the “isolated and distinguishable events” of “hiring, firing, and promoting.” Id., at 238. Rather, Title VII could also be violated by a work environment “heavily polluted with discrimination,” because of the deleterious effects of such an atmosphere on an employee’s well-being. Id.

Despite the recognition that racism at work could amount to unlawful discrimination, courts have been reluctant to hold that any and all displays of racism rise to the level of changing the workers “terms, conditions, or privileges of employment.”
In 1982, the Fifth Circuit stated that in order to be unlawful “a discriminatory and offensive work environment [must be] so heavily polluted with discrimination as to destroy completely the emotional and psychological stability of minority group workers.” Vaughn v. Pool Offshore Co., 683 F.2d 922, 924 (5th Cir. 1982) (quoting Rogers v. EEOC, 454 F.2d 234, 238 (5th Cir. 1981). Wow. It is crazy to think that previously workers were told by courts that racism in the workplace was not unlawful unless it completely destroyed their emotional and psychological stability.

In that case, the plaintiff failed in showing that the abusive work environment was unlawfully based on race regardless of the fact that he was called a “nigger,” “coon,” and “black boy” and a pool house nearby had “KKK Headquarters” written on it. Id. at 924. There were several other utterances of racial epithets and a workplace culture of violent hazing. Id. at 923. The court wrote that all the employees used similar racial epithets “without apparent hostility or racial animus.” Id. at 924. Basically, in 1982, the Fifth Circuit court ruled that using racial epithets in the workplace was normal.

Compare that 1982 case to one currently before the Supreme Court. Presently, the Supreme Court is being asked to consider whether a hostile work environment claim can survive summary judgment when there was racist graffiti (the N-word and two swastikas) and the plaintiff was called “boy” one time—potentially outside of the limitations period. Collier v. Dallas County, 3:17-CV-3362-D. (June 6, 2019 5th Cir.) Justice Kavanaugh in a DC Circuit Court opinion wrote that one instance of the N-word is severe enough to constitute racial harassment. Ayissi-Etoh v. Fanny Mae, 712 F.3d 572 (D.C. Cir. 2013). That being said, Justice Coney Barret ruled against summary judgment in a case with one utterance of the N-word. Terry Smith v. Illinois Department of Transportation (7th Cir. 2019). It is possible that racist graffiti is even more disturbing than a spoken utterance because the worker does not know who wrote the epithet, and the worker must endure it every day along with the knowledge that his coworkers seem to acquiesce to its presence. The Supreme Court decision in this case will help to determine the continued strength and relevance of the Civil Rights Act.

In some ways it seems that Title VII is not keeping up with society’s notions about the unacceptability of racism. Recently, a federal district court dismissed a complaint made by Whole Foods employees that the grocery store was selectively enforcing a dress code and penalizing employees who wore Black Lives Matter facemasks but not other employees who wore other slogans. Meanwhile, Taco Bell apologized for allegedly firing an employee for wearing a Black Lives Matter face mask, offering the longtime employee his job back. The latter reconciliation was due to a Facebook Live post and news coverage, not a court case.

While we do not yet know what effect the Supreme Court’s ruling in the above case will have on the federal discrimination standard, we can take some comfort in the fact that New York recently amended its discrimination law to make it easier to show that harassment is unlawful. Under the new standard, a plaintiff need not show that the harassment is severe or pervasive, but only that it altered the terms and conditions of employment. The employer can defend itself if the complained of conduct did not rise above the level of “petty slights or trivial inconveniences,” but it is hard to imagine that a coworker using a racial epithet could be construed as a “petty slight” in 2021.

Unfortunately, the changes to New York law have yet to be tested in court. We can only hope that our laws against discrimination will not permit racial epithets to persist in the workplace unpunished.

One week to our Workplace Bullying CLE Presentation.  Hope you can join us!