Updates to Federal and NY State Wage Laws
Three recent developments in federal and New York State wage laws will impact which employees qualify as exempt from minimum wage and overtime pay requirements, how much employers will be required to pay hourly employees, and the consequences for failing to pay employees for work performed. On the federal level, the US Department of Labor (“DOL”) has issued a proposed rule which would increase the salary thresholds necessary to qualify for an exemption from minimum wage and overtime requirements under the Fair Labor Standards Act. On the state level, NYS legislators have enacted two pieces of legislation: one that increases the statewide minimum wage annually through 2026 and a second that makes wage theft a larceny under the NYS penal code. Each of these developments is discussed in more detail below.
US Department of Labor Proposed Overtime Rule
Under the Fair Labor Standards Act (“FLSA”), employees are entitled to overtime pay unless they qualify for an exemption under the FLSA. With certain exceptions, exemptions generally require satisfaction of both a duties test and a minimum salary threshold. On September 8, 2023, the DOL issued a Notice of Proposed Rulemaking (“NPRM”) which would increase the minimum salary thresholds necessary to qualify for the executive, administrative and professional (“EAP”) exemptions, which currently sit at $684 per week ($35,568 annually). Under the proposed rule, employees would need to be paid at least $1,059 per week (approximately $55,000 per year) to meet the salary threshold. The proposed rule would not modify any of the duties requirements for the exemptions.
The proposed rule would also increase the salary threshold to qualify for the FLSA’s Highly Compensated Employee exemption. To qualify for this exemption, workers would have to earn at least $143,988 per year, compared to the current requirement of $107,432. The proposed rule also includes a mechanism for automatically updating the minimum salary thresholds every three years to reflect current earnings data.
New York State law already imposes salary thresholds above those that would be required under the NPRM for employees qualifying for either the executive or administrative exemptions, such that increases in salary for New York State executive and administrative employees would not be required should the proposed rule be adopted (though state increases are anticipated as discussed below). However, because NYS law does not require professional employees to receive a minimum salary, New York employes relying on the professional exemption to overtime may need to increase salaries to continue to qualify for the professional exemption under federal law. Multi-state employers with employees outside of New York should consult with counsel regarding other state overtime exemption thresholds to determine what other changes to employee wages may be necessary.
Comments to the proposed rule will be accepted through November 7th. We will continue to monitor the status of the proposed rule, as well as any challenges to the final rule if implemented. In the meantime, employers, and multistate employers in particular, may wish to review their worker classifications and employee pay structures to ensure these practices align with the NPRM and any applicable state wage requirements.
Increases to New York State Minimum Wage Rates
New York enacted state budget legislation that will incrementally increase the statewide minimum wage each year through 2026. Currently the NYS minimum wage is $14.20 per hour statewide, except for in New York City and the “downstate” region (Nassau County, Suffolk County, and Westchester County), where the minimum wage is currently $15 per hour. Effective January 1, 2024, the statewide minimum wage will be $15 per hour with a minimum of $16 per hour in NYC and the downstate region. The following year, effective January 1, 2025, those amounts will both be increased by 50 cents (to $15.50 and $16.50, respectively), and finally, to $16 per hour statewide and $17 per hour in NYC and the downstate region on January 1, 2026. Beginning in 2027, increases to the state minimum wage rates will be established annually by the NYS Department of Labor provided certain conditions are met. The legislation also provides for modifying pay requirements set by NYS wage orders, which (among other items) set the minimum salary levels to qualify for the administrative and executive exemptions from overtime pay requirements. As the NYS minimum wage increases, the bill states that the NYS DOL is to issue modified wage orders which increase the monetary amounts set in such wage orders proportionally with the state minimum wage increases. It is therefore anticipated that the exempt thresholds under NY law’s administrative and executive exemptions will increase effective January 1, 2024, as well.
Wage Theft is Now a Form of Larceny in New York State
Governor Hochul signed a bill which, effective immediately, amends the definition of larceny under the NYS penal code to include wage theft. The law now states that “a person obtains property by wage theft when he or she hires a person to perform services and the person performs such services and the person does not pay wages, at the minimum wage rate and overtime, or promised wage, if greater than the minimum wage rate and overtime, to said person for work performed.” This means that employers can now be charged with larceny if they fail to pay workers the minimum wage and overtime, or the wage promised to the employee (if greater than the minimum wage) for work the employee performed.
The law also permits aggregation of non-payments or underpayments to one person from one employer into one larceny count, and aggregation of all non-payments and underpayments from a workforce into one larceny count, even if the non-payments or underpayments occurred in multiple counties. The law defines a workforce as “a group of one or more persons who work in exchange for wages.” This will allow prosecutors to charge multiple incidents of wage theft against an employer in a single action, whereas otherwise they would have been required to bring them separately. This aggregation could also result in significantly harsher penalties for employers as the amount of the wage theft increases. In New York, petit larceny is a Class A misdemeanor, for which an employer could be fined up to $5,000. If the theft is for $1,000 or more, however, the employer could be charged with grand larceny, a felony with increasing degrees of severity.
Employers with questions about these updates, employee exemption classifications, wage practices, or other overtime pay requirements should contact Kate Townley at ktownley@fglawllc.com or any other attorney at the Firm.
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