The new federal overtime rules recently proposed by the Department of Labor sparked some concerns among employers across the country, but perhaps not so much in New York.
Employers in the state are already well acquainted with dealing with higher salary minimums for some so-called “white-collar” workers. In addition, there is also a primary job duties test that must be met under the Fair Labor Standards Act (FLSA).
For most businesses nationwide, exempt employees will usually fall into one of the three white collar exemption categories: executive, administrative and professional. Each exemption has its own unique set of duties and requirements that must be met in addition to meeting the salary threshold.
In 2017, New York applied a tiered exemption system, by-region, for two of these classifications (administrative and executive), meaning different parts of the state had different salary minimums that qualify as “exempt.”
2019 and beyond will bring more changes in salary thresholds across the state
In 2019, New York City large employers, defined as having 11 or more employees, will be required to pay individuals classified under these two exemptions a minimum of $58,500 annually or $1,125 per week.
The city's small employers, 10 or fewer employees, will be required to pay individuals classified under these two exemptions at least $52,650 annually or $1,012.50 per week.
In the counties of Nassau, Suffolk and Westchester, the minimum salary requirement is $46,800 annually or $900 a week.
For employers in the rest of the state, the minimum is $43,264 annually or $832 a week.
On Dec. 31, 2019, New York City's small employers’ rate will increase to $58,500 annually or $1,125 a week; Long Island and Westchester increases to $50,700, then $54,600 in 2020, and $58,500 annually on Dec. 31, 2021. Likewise, all other New York State counties will increase to $46,020 at the end of 2019 and $48,750 in 2020.
So, the proposed federal increase for white collar exemptions (from $23,660 to $35,308 per year) will still be lower than the minimum requirements for administrative and executive exempt employees in all of New York State.
If passed, the new rule would call for an exempt employee to be paid a minimum of $679 per week, or alternatively, an employer may choose to reclassify the employee as “non-exempt” and pay overtime at one and one-half the regular hourly rate for all hours worked over 40 in a workweek.
New York currently recognizes exemptions for the following positions which are also exempt under the FLSA: 1) executive employees, 2) administrative employees, 3) professional employees, 4) outside salespeople, 5) individuals working for a federal, state, or municipal government, 6) farm laborers, 7) certain volunteers, interns and apprentices, 8) taxicab drivers, 9) members of religious orders, 10) certain individuals working for religious or charitable institutions, 11) camp counselors, 12) individuals working for a fraternity, sorority, student or faculty association, and 13) part-time baby sitters.
This increased minimum salary threshold will affect employees who fall under some, but not all, of these other exemptions in New York. For example, exempt employees under the professional exemption are not subject to a New York salary threshold. However, employees will still be subject to the federal threshold. Likewise, outside sales people will still be subject to the federal minimum requirements. Where the state and federal government vary in their minimums, the higher wage will prevail.
Non-exempt employees
If an employer decides to reclassify an employee as “non-exempt,” the employer does not need to comply with these increases for exempt employees, though they must maintain accurate records of hours worked for all non-exempt individuals.
The employee would earn at least minimum wage for every hour worked and time and a half for all hours worked over 40. The employee will likely also be subject to “spread of hours pay” – an extra hour of pay at the minimum wage rate that must be paid to non-exempt employees covered under particular wage orders when the time between the beginning and end of their workday exceeds 10 hours.
Minimum wage
New York also has tiered minimum wage across different geographic regions of the state. Like the exemption thresholds for administrative and executive employees, these tiers last saw an increase on Dec. 31, 2018.
In New York City, the minimum wage is $13.50 per hour for businesses with 10 or fewer employees, and $15 per hour for businesses with 11 or more employees. In Nassau, Suffolk and Westchester counties, it is $12 per hour, increasing to $13, $14 and $15 on Dec. 31, 2019, 2020 and 2021 respectively.
In the remainder of the state, it is $11.10 per hour, increasing to $11.80 on Dec. 31 of this year and $12.50 in 2020. There are different hourly rates for workers in the fast food industry and those who receive tips.
Required notifications to employees
Changing an employee’s rate of pay will also trigger a mandatory notification to employees under New York law. Any changes to an employee’s wages or information on the wage notice received at hire requires employers to provide a new wage notice. Such notices must be provided seven days in advance.
For non-hospitality employers, where the change is limited to a wage increase, the full notice is not required if the previous rate of pay and new rate of pay are shown on the next wage statement/paycheck. Hospitality employers have slightly different rules.
Overall, if the proposed federal rule is enacted, it will only affect New York exempt employees outside of those falling under the administrative and executive exemptions. However, those who do fall under the administrative and executive exemption will already be receiving pay well above the minimums required by the federal government.
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As published in The Business Journals
By Jay Starkman and Vanessa Matsis-McCready