Paid Family Leave and $15 Minimum Wage Are Coming to New York

Authors: James W. Lytle, Jessica Shpall Rosen and James S. Walsh

Why It Matters

On April 1, 2016 the New York State Legislature passed legislation that would raise the state minimum wage for all hourly wage workers in accordance with a prescribed schedule. Governor Andrew Cuomo signed the legislation into law on April 4, 2016, making New York one of two states that day—the other being California—to gradually raise the hourly minimum wage to $15 an hour. Governor Cuomo's approval of the bill culminated a coordinated, several-month effort by his Administration, organized labor, and political parties to promote the increase of the minimum wage to $15 an hour. The first increase will take effect on December 31, 2016.

As part of the same package, Governor Cuomo signed into law groundbreaking paid family leave legislation that will cover most New York employees. The law amends the current employee disability benefits law by adding new benefits and job protections for employees who need time off from work to care for family members. This is a significant development in New York, which previously did not have its own state family leave law to supplement the federal Family Medical Leave Act.

Detailed Discussion

1. New Minimum Wage

In July 2015, Governor Cuomo had directed his Commissioner of Labor to convene a Wage Board to review the sufficiency of the-then minimum wage of $8.75 an hour, which was scheduled to increase to $9 an hour on December 31, 2015, for fast-food workers. The Wage Board subsequently recommended that a much higher hourly wage was necessary for fast-food workers employed by fast-food restaurants with 30 or more locations nationwide. The Commissioner of Labor accepted the Wage Board's recommendation and issued a wage order in September 2015, with a schedule to increase fast food worker wages incrementally to $15 an hour on December 31, 2018, in New York City and on July 1, 2021, for the remainder of the state. The first increase took effect on December 31, 2015 to $10.50 an hour in New York City and $9.75 an hour for the remainder of the state. The fast-food industry and many business groups objected to the Governor's use of this administrative process to raise wages—and at least one lawsuit was commenced—and they and others, including nonprofit providers, expressed concerns with the potential impact of wage disparity between fast-food workers and all other lower-wage workers—with workers in key human service jobs migrating to higher-paying fast-food worker jobs.

Undeterred, Governor Cuomo proposed to increase wages for all workers in his Executive Budget proposal in January 2016, in accordance with the same wage schedule for fast-food workers. After several months of strident advocacy on both sides of the proposed wage increase and significant support and reticence by many state legislators, a compromise among the Governor, the Senate and the Assembly was reached in the waning hours of March 31, which provided the following:

• A regional approach to minimum wage increases: (i) New York City; (ii) Suffolk, Nassau and Westchester counties; and (iii) the remainder of the state (i.e., Upstate).
• A two-tiered minimum wage for New York City: small employers (10 or fewer employees) and large employers (11 or more employees).
• A delayed increase in the minimum wage than was initially proposed by Governor Cuomo for Upstate New York, the metropolitan suburbs, and small and large employers in New York City.
• An authorization for the Director of the State Division of Budget, in consultation with the Department of Labor, to increase the minimum wage for Upstate above $12.50 an hour, but not to exceed $15 an hour, beginning on December 31, 2021, if several economic indicators (such as the rate of inflation and state personal income growth) justify an increase.
• Establishes a minimum wage rate for tipped workers at 2/3 of the statutory minimum wage rates or $7.50 an hour, whichever is higher.
• After January 1, 2019, and every January 1 thereafter, the State Division of Budget is tasked with conducting an analysis of each regional economy and the effect of the minimum wage increases, and determining whether future increases should be temporarily suspended or delayed.
• Prohibits the Commissioner of Labor from convening any Wage Boards to establish an administrative minimum wage that exceeds the minimum wage provided for in the statutory schedule.
• Authorizes, but does not mandate, the Commissioner of Labor to modify an existing wage order—such as the September 2015 Wage Board order for fast-food workers—to conform the Wage Board schedule with the statutory wage schedule, provided that such conformity does not reduce employees' wages.

Click here to view a chart which illustrates the wage schedules referenced above.

A closely related issue in the State Budget involved whether the state would augment funding for health and human services providers that rely on state funding to increase wages for their lowest wage workers in order to satisfy the increased minimum wage. After weeks of rallies, inconsistent messages from the Administration and growing support in the Legislature, the final budget contained additional appropriations across the various sectors likely to be most affected by the minimum wage increase. Appropriations were included to support special education services provided by school districts ($1.1 million), for substance abuse/alcoholism providers ($800,000), for mental health providers ($600,000) and providers of services to persons with developmental disabilities ($4.1 million). At the same time, the State's Medicaid Global Cap budget included state share increases of $58 million in this fiscal year, increasing to $160 million in 2017-18. Separately enacted legislation also adjusted the so-called "wage parity" law that already had boosted home care worker's compensation to reflect the increases in the minimum wage.

2. Paid Family Leave

As part of the same package as the new minimum wage law, Governor Cuomo signed into law groundbreaking paid family leave legislation that will cover most New York employees. The law amends the current employee disability benefits law by adding new benefits and job protections for employees who need time off from work to care for family members. This is a significant development in New York, which previously did not have its own state family leave law to supplement the federal Family Medical Leave Act (FMLA).

Scope of Leave

The law provides up to 12 weeks of paid, job-protected leave to employees who need a leave of absence to (1) care for a family member with a serious health condition, (2) bond with a new baby or a child after foster or adoptive placement, or (3) address family needs due to the active military duty of a close family member. "Family member" is defined broadly to include children, parents, grandparents, grandchildren, spouses, or domestic partners, and is not limited to blood relatives.

Eligibility

Employees are eligible if they have worked 26 or more consecutive weeks for a covered employer. There is no minimum amount of hours that an employee must have worked during those 26 weeks, so the law applies equally to both part-time and full-time employees. To be able to receive paid family leave, employees must provide employers with written notice and a medical certification.

All employers, regardless of size, are covered; the statutory definition of "employer" has not been amended, and therefore all entities with at least one employee must comply with the law.

Amount of Leave Benefits

Paid family leave benefits will be phased in starting in January 2018. Click here to view a chart which illustrates the schedule.

The state superintendent of financial services has the authority to examine the financial impact of the family leave benefits and delay the implementation of the above schedule as necessary.

The benefits will be funded by employees themselves, in the form of payroll deductions. The actual amount of the deductions will be decided by the superintendent of financial services by June 1, 2017, but it is estimated that the cost to employees will be approximately $1 per week. Benefits plans will be administered by the state insurance fund or private insurers, similar to the existing employee disability benefit scheme.

Nature of Leave

Eligible employees may take intermittent leave and may receive paid benefits in increments as low as one full day. Similar to the FMLA, during New York paid family leaves of absence, employers must maintain health insurance benefits under the same terms and conditions that apply while the employee is working.

Unlike the FMLA, under the New York law, employers must allow eligible employees to choose whether to apply all or part of any accrued but unused paid time off during the state-mandated paid family leave period. Employers that pay full salary during the family leave period may request reimbursement of the amount due from the insurer. Paid family leave benefits may run concurrently with FMLA leave. No employee may receive more than 12 weeks of paid family leave in any 52-week period. If the employee also needs to take disability leave, the maximum duration of the combined leaves is 26 weeks in any consecutive 52-week period.

If the need for leave is foreseeable, the employee must provide 30 days' notice to the employer. If not, the employee must provide as much notice as is practicable.

Job Protection

Similar to the FMLA, eligible employees who take paid family leave are entitled to be restored to their position or to a comparable position with "comparable employment benefits, pay and other terms and conditions of employment." However, unlike the FMLA, there are no exemptions from this reinstatement requirement; employers may not take advantage of the "key employee" exemption. See 29 U.S.C. § 2614(b).

In addition, the new law prohibits retaliation against employees who seek to take or who take family leave.

Takeaways:

• All New York employers, regardless of size, will need to comply with the new paid family leave law.
• New York employers should carefully review their existing leave policies.
• New York employers should be mindful of the interplay of federal, state, and city leave laws when addressing requests for leave and disability or pregnancy accommodation.