On April 1, 2013, Governor Cuomo signed legislation that will increase New York’s minimum wage (currently, $7.25/hour) to $9.00/hour over a three-year period. Starting December 31, 2013, the minimum wage will raise incrementally as follows:
- December 31, 2013 – $8.00/hour
- December 31, 2014 – $8.75/hour
- December 31, 2015 – $9.00/hour
What many employers don’t know is that raising the minimum wage above the current minimum of $7.25/hour will also grow the number of workers in New York entitled to “spread of hours” pay.
“Spread of hours” pay is unique to New York. It is not well-known among employers because the spread rules are not found in the New York Labor Law, but rather, in industry-specific wage orders promulgated by the Commissioner of Labor.
What is “Spread of Hours” Pay?
“Spread of hours” pay is an extra hour of pay at the minimum wage rate that must be paid to certain non-exempt employees (i.e., employees who must be paid overtime wages) when the interval between the beginning and end of an employee’s workday (the so-called “spread”) exceeds 10 hours. The additional hour of pay is not payment for work performed and need not be factored in when calculating overtime pay. The spread includes working time plus time off for meals and any off-duty time, the result of which is that an employee working 10 hours or less on a particular workday may still be entitled to an extra hour of “spread of hours” pay.
Consider the following scenarios:
- An employee works 7:00 am to 10:00 am, then again from 7:00 pm to 10:00 pm in the same workday. The employee has worked 6 hours over a 15-hour spread.
- An employee works from 11:30 am to 3:00 pm, then again from 4:00 pm to 10:00 pm in the same workday. The employee has worked 9.5 hours over a 10.5-hour spread.
- An employee works from 7:00 am to 5:30 pm, with two unpaid 30-minute meal breaks. The employee has worked 9.5 hours over a 10.5-hour spread.
In each of the scenarios above, the employees work less than 10 hours, but over a spread that exceeds 10 hours. Depending on the employer’s industry and sector, “spread of hours” pay may or may not be due in each of the scenarios. This is because many workers’ eligibility for “spread of hours” pay is determined by a formula that calculates how much more they earn above the minimum wage.
Industries and Sectors Requiring “Spread of Hours” Pay
“Spread of hours” pay is required:
- In the hospitality industry (which includes hotels, restaurants and bars);
- In all other industries, except for the building service and farming industries; and
- By all non-profit organizations, except for those non-profits that are exempt from wage order coverage under New York Labor Law § 652(3).
“Spread of Hours” Rules in All Industries and Sectors, Except for the Hospitality Industry
With the exception of the hospitality industry, in all industries and sectors requiring “spread of hours” pay, the New York Department of Labor and most New York courts have interpreted the “spread of hours” requirement not to affect workers whose total weekly compensation is sufficiently above the minimum rate. The practical effect is that “spread of hours” pay would be due in each of the three scenarios discussed above only if the total wages paid to the employee are not equal to or greater than the total due for (1) all hours at the minimum wage plus (2) one additional hour at the full minimum wage.
By way of example: An employee who currently earns $8.75/hour works a 12-hour spread, in which he has 11 hours of working time. At the current minimum wage rate of $7.25/hour, this employee must be paid at least $87.00 for 11 hours at the minimum wage rate, plus an additional one hour for “spread of hours” pay. (This example assumes that the employee does not work more than 40 hours in the week in question and, therefore, is not entitled to overtime pay.) Here, the employee is not entitled to an extra hour of pay for “spread of hours” because the employee is sufficiently compensated with $96.25 for 11 hours of work at his wage rate of $8.75/hour.
With the expected minimum wage increases, this means that this same employee, who is not currently entitled to “spread of hours” pay, will be entitled to that extra hour of pay when the minimum wage increases to $8.75/hour.
It is important to note that these same industries and sectors also require an extra hour of pay at the full minimum wage rate when employees work a “split shift.” A “split shift” is a schedule of daily hours in which the working hours required or permitted are not consecutive. (A meal period of one hour or less is not considered a break in consecutive hours.) When both situations occur (that is, the spread exceeds 10 hours and there is a “split shift”), employees are only due one additional hour of pay (as opposed to two hours) as “spread of hours”/“split shift” pay.
Whether the same formula that is used to determine a worker’s eligibility for “spread of hours” pay is used to determine a worker’s eligibility for “split shift” pay is open for debate. Logic suggests that the formula should apply, but to date, neither the New York Department of Labor nor any of the New York courts have explicitly applied the formula to a scenario involving only a “split shift.”
“Spread of Hours” Rules in the Hospitality Industry
In the hospitality industry, “spread of hours” pay must be paid to employees for any days in which their spread is over 10 hours, regardless of how much the employee makes.
It’s important for hospitality industry employers to note that since “spread of hours” pay is at the full minimum wage rate, they may not apply any credits/allowances – such as those for tips, meals, and lodging – to the “spread of hours” payment.
There is no provision for “split shift” pay in the hospitality industry wage order. This means that, while there is a considerable potential for overlap between an employee’s “spread of hours” and his work under a “split shift,” hospitality industry employers are not required to pay employees an extra hour of pay at the full minimum wage in situations where there is only a “split shift,” but “spread of hours” does not exceed 10.