Significant Changes to NY State Minimum Wage and Exempt Salary Obligations Take Effect on December 31, 2016

Attention was scarcely paid to an October 2016 issuance of proposed wage orders by the New York State Department of Labor. But they are now set to take effect December 31, 2016, and employers must be aware of their significance: These wage orders raise the minimum wage for New York employees and increase the salary threshold that must be paid to those classified as exempt from overtime under the administrative or executive exemption under New York state law, based on the employer’s size and location (see below).

The proposed wage orders were met with relatively little fanfare back in October, because employers in New York, as elsewhere, were already anticipating that federal Department of Labor regulations, which were set to become effective on December 1, 2016, would raise the minimum salary threshold for exempt employees covered by the “white collar” exemptions under the federal Fair Labor Standards Act to $913 per week, which equates to $47,476 annually for a full-year worker and which would have been higher than the proposed NYS salary threshold.

To the surprise of many, a federal judge in Texas issued an injunction in late November 2016, blocking implementation of the federal overtime pay regulations.  While this injunction meant that employers would not be required to raise the salaries of many exempt employees in order to maintain their exempt status under federal law, employers in New York were left in abeyance, waiting to see whether New York would proceed with its proposal to raise the salary threshold for certain exemptions under state law. 

On December 28, 2016, New York State’s Department of Labor published its wage orders in their final form (unchanged from the proposed regulations), with an effective date of December 31, 2016.  The State published a summary of the wage orders, which can be found here. These orders make immediate and future changes to NY State minimum wage and exempt salary obligations.

The minimum weekly salary that must be paid to maintain an employee’s status as exempt under the state’s administrative and executive exemptions (the professional exemption is not affected) will vary by the employer’s size and by the location or locations where the employee performs work, and it will rise annually on December 31, 2016, 2017, 2018, and 2019. Employers must increase salaries to the new minimums beginning with the paycheck which covers December 31 of each applicable year. The following chart illustrates these changes:

In addition to the increase to the minimum salary threshold for the administrative and executive exemptions under state law, employers also need to be aware that the minimum wage in New York is set to rise on December 31, 2016, also in accordance with the employer’s size and the location or locations where the employee performs work.  The minimum wage increases are reflected in this chart:

When it published the final wage orders on December 28, the NYSDOL also published “Frequently Asked Questions” which respond to some concerns raised by employers after the wage orders were proposed in October 2016.  For example, the FAQs clarify that a “large employer” in New York City is one that employs at least one employee in New York City and has employed more than 10 employees (meaning, 11 or more) at any time during the current or prior calendar year and among all worksites.  The FAQs also explain that if an employee of a “large” New York City employer performs work outside of New York City, that employee need not be paid the higher minimum wage for times during which the employee works outside New York City – but the employer must record each hour worked at each rate and identify the applicable rate of pay on the employee’s pay stub.

The wage orders will require careful attention by New York employers, in order to ensure that workers are paid in accordance with the significant changes in the law described above.  Any member of our New York-based Employment Services Group is available to assist with implementation of the changes required by the wage orders.

FOOTNOTE

1 Annual increases for the rest of the state will continue until the rate reaches $15 minimum wage (and $10 tipped wage). Starting 2021, the annual increases will be published by the Commissioner of Labor on or before October 1. They will be based on percentage increases determined by the Director of the Division of Budget, based on economic indices, including the Consumer Price Index.