New York State Minimum Wage Increases Are Here: Are You Compliant?

It’s been more than one month since the minimum wage increased for all New York State employees. Is your business compliant? 

In September 2023, we published an alert discussing New York State’s planned increases to minimum wage, tip credits, and various exemption threshold levels. Those increases were finalized and have been in effect since January 1, 2024. For your business to be compliant, you must pay your employees the right amount and pay them the correct way. Failure to comply can lead to significant monetary damages. 

Minimum Wage and Overtime Rate Increases

All of New York State saw a minimum wage increase effective January 1, 2024.

Annual increases will continue through December 31, 2026, after which they will be adjusted for inflation. 

Exemption Thresholds

Certain employees are exempt from minimum wage and overtime pay requirements if they meet certain tests under state and federal law. The salary threshold test for the executive and administrative/managerial exemptions in New York State increased effective January 1, 2024.

As noted in the table below, New York State continues to follow the salary threshold test for the professional exemption set by the Fair Labor Standards Act (FLSA). 

Failure to properly classify your employees as exempt or nonexempt (e.g., not paying them at least the proper salary threshold or ensuring they perform the prescribed duties for the exemption) could lead to an employer being liable to the employee for unpaid minimum wage and overtime in addition to penalties under the Wage Theft Prevention Act (WTPA), which we discuss below.

Barclay Damon LLP and its attorneys are standing by to help you ensure your employee classifications are compliant.

Tip Credits and Minimum Wage for Tipped Workers

Certain employees who work in the hospitality industry and who regularly receive tips (e.g., servers, bartenders, bussers, and runners) may have a tip credit applied against their minimum wage rate.¹ For example, in Upstate New York, where the minimum wage is $15.00 per hour, hospitality employers are allowed to pay tipped employees a lower base wage of $10.00 per hour. This lower wage is possible because of the $5.00 tip credit, which is essentially an amount that the employer can subtract from the full minimum wage under the assumption that the employee will make up the difference through tips. If they do not, the employer must restore the employee’s rate to full minimum wage. 

The below table describes the updated amounts throughout New York State over the next three years. 

* This equals full overtime, minus the applicable tip credit. The tip credit is always deducted after calculating overtime based on the full minimum (or regular) wage. 

The deadline for compliance has passed, and the deadline will reappear again. It is crucial to recognize the steep penalties for failing to adhere to these new wage regulations. Infringements can result in employees being owed unpaid wages and overtime and can be compounded with penalties under the WTPA.

Under the WTPA, failure to provide the proper wage acknowledgment form can incur a minimum penalty of $50 per day and up to $5,000 per employee. Incorrect paystubs can lead to a $250 penalty per pay period and up to $5,000 per employee. For example, if a NYC restaurant fails to adjust its servers’ wages and overtime for January 2024, it could be liable for unpaid minimum wages, overtime, WTPA (pay notice and wage statement) penalties—all of which continue to accrue until full compliance is achieved. This situation underscores the need for a meticulous review and adjustment of payroll practices. 

Facing a NYS Department of Labor audit or private litigation for failing to comply with minimum wage rules can be incredibly costly. Staying ahead of these changes to and strict compliance with employment regulations is paramount. Barclay Damon is here to assist you in embracing these changes and implementing employment practices tailored to your business and industry.

If you have any questions regarding the content of this alert, please contact Rosemary Enright, Labor & Employment Practice Group leader, at renright@barclaydamon.com; Lee Jacobs, partner, at ljacobs@barclaydamon.com; Shawn Chowdhury, associate, at schowdhury@barclaydamon.com; or another member of the firm’s Labor & Employment Practice Area, Corporate Practice Area, or Hotels, Hospitality & Food Service Team.
                                                                                                 
¹There are different tip credit rates (and thresholds: the minimum average amount of tips an employee must receive) for tipped service employees who work in the hospitality industry but do not serve food. Think coat checkers and bathroom attendants. For 2024, service employees in New York City, Long Island, and Westchester County, the cash wage is set at $13.35 per hour with a tip credit of $2.65. In the rest of New York State, these amounts are slightly lower, with a cash wage of $12.50 and a tip credit of $2.50. These amounts will increase each year as well.