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State legislation increases wages, mandates family leave

New York recently passed landmark legislation raising the minimum wage and mandating paid family leave. The state will gradually raise its minimum wage to $15 an hour for most workers and become the first state to require that employees receive 12 weeks of paid family leave under a bill signed by Gov. Andrew Cuomo on April 4.

New York’s minimum wage rate will increase over the next several years but at different rates depending on the area of the state in which the employee works.

Workers in New York City employed by a business with at least 11 workers will see the minimum wage rise to $11 per hour at the end of the year, with another $2 increase each year after to reach the $15 minimum wage by the end of 2018.

For workers in New York City employed by businesses with 10 workers or less, the minimum wage will go up to $10.50 per hour by the end of 2016, then another $1.50 per hour each year, reaching $15 by the end of 2019.

Workers in Nassau, Suffolk and Westchester counties will see the minimum wage go up first to $10 per hour, followed by a $1 increase annually to reach $15 per hour by 2021.

For workers in all counties north of Westchester County, the increases will progress at an even slower pace, starting at $9.70 at the end of 2016 and reaching a $12.50 per hour minimum wage by the end of 2020. In a concession to upstate lawmakers and businesses, the minimum wage there will not rise to $15 until a study is conducted by the state and a new indexed schedule is set.

Notably, the new law also mandates an increase in the minimum wage for tipped food service workers. The bill requires tipped food service employees (who currently must earn at least $7.50 per hour and receive a tip credit of at least $1.50 per hour) to be paid the higher of the current tipped minimum wage or two-thirds of the state minimum wage and receive a tip credit equal to the difference between tipped and regular minimum.

The law also contains what Cuomo has described as a “safety valve” for the state’s economy in which the state would conduct annual economic studies beginning in 2019 to determine if the scheduled increases across the state should be suspended.

Paid family leave
The bill signed by Cuomo also makes New York workers the beneficiaries of the nation’s longest and most comprehensive paid family leave program.

Beginning in 2018, after having worked for their employer for six months, all full- and part-time employees will be eligible to take paid family leave to care for a family member with a serious health condition, to bond with a child during the first 12 weeks after the child’s birth or the first 12 weeks after the child has been placed for adoption or foster care with the employee or to relieve family pressures when a spouse or family member is called to active military service. The state’s definition of a “serious health condition” in large part tracks the definition under the federal Family and Medical Leave Act, or FMLA.

Employees who take family leave will enjoy job protection, even if they work for employers with fewer than 50 workers who are not currently subject to the federal FMLA, since the state law applies to all employers regardless of size. Notably, however, the leave provisions are not identical to those set forth in the federal FMLA, so the state law may not be applied in the same manner as the federal law.

Like the minimum wage rate, the paid family leave mandate will be implemented in phases. Beginning Jan. 1, 2018, workers will be eligible for up to eight weeks of leave, paid at 50 percent of their average weekly pay, up to a maximum of 50 percent of the statewide average weekly wage (i.e., approximately $630). By 2021, at which time the plan will be fully implemented, employees will be eligible for up to 12 weeks of leave, paid at 67 percent of the employee’s average weekly pay, up to a maximum of 67 percent of the statewide average weekly wage.

The paid family leave program will be funded through a payroll deduction on employees, a move Cuomo asserts will cost businesses “nothing.” It will cost employees about $1 per week.

What’s next?
The passage of these two pieces of legislation will create additional challenges for New York employers. In addition to the sheer cost of increased minimum wages, all New York employers will be challenged. Businesses are certain to incur costs in recruiting, hiring and training replacement employees, not to mention lost productivity and efficiency. Many organizations with limited resources will struggle to maintain productivity and service levels when key employees take intermittent leave, which, because of its unpredictability, often precludes the hiring of replacements. In short, this legislation is likely to increase costs, despite the governor’s assertion that it will cost nothing.

Jeffrey LaBarge is a partner with Nixon Peabody LLP. He developed this article with Stephen J. Jones, Todd R. Shinaman, Joseph A. Carello and Kimberly Harding from the firm’s labor and employment group.

5/13/2016 (c) 2016 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email rbj@rbj.net.

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