WAGE STATUTES: BASIC REQUIREMENTS FOR TIPPED EMPLOYEES

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If you haven’t been audited yet get your paperwork in order because the Federal DOL and New Mexico Workforce Solutions are targeting restaurants.

If you are in any way responsible for making payroll at your restaurant DO NOT MISS this resource on the new minimum wage in NM.

This blog focuses on employment topics relevant to restaurant owners. Specifically, NMDWS staff will provide an overview of the Minimum Wage Act and, as it applies to tipped employees, as well as municipal tip requirements and recent legislative changes.

We understand restaurant payroll is often complex, and the laws are difficult to interpret. But there are NO excuses when payroll isn’t done correctly. Audits are serious and back pay with penalties can run into hundreds of thousands of dollars. Employees are becoming savvy, they have legal groups working on their behalf to catch employers mishandling payroll. Please don’t let this be you.

Minimum Wage Act, NMSA 1978, § 50-4-19 through § 50-4-30
Wage Payment Act, NMSA 1978, § 50-4-1 through § 50-4-12

Wage Payment Act requirement

  •  Every employer shall keep a true and accurate record of hours worked and wages paid to each
    employee. The employer shall keep such records on file for at least one year after the entry of the
    record. § 50-4-9.
  • Every employer shall keep time record of number of hours each employee works each day and
    these records shall be open at all reasonable hours for inspection by LRD. § 50-4-16.
  • Employer must keep such records on file for at least one year after the entry of the record, § 50-
    4-9(A).
  • Each employer shall keep true and accurate employment and payroll records for each and every
    individual performing services for it and these records shall be preserved for a period of at least
    four years in addition to the current calendar year. NMAC 11.3.400.401 (Unemployment
    Insurance Regulation).LRD shall have the right at all reasonable times to inspect such records for purposes of
    ascertaining compliance with WPA. § 50-4-9(B).
  • LRD has power to issue subpoenas for production of payroll records. § 50-4-9(D).
  • Any interference with LRD in performance of its duties shall be deemed a violation of the Act and
    punished as such. § 50-4-9(C).
  • Failure to keep records, falsifying records or failure to comply with Act is a misdemeanor
    punishable by fine not less than $75 or more than $300 per offense.

Minimum Wage Act Requirements

  • Pay the highest applicable minimum wage. § 50-4-22.1 (“local law or ordinance…that provides for
    a higher minimum wage rate than that set forth in the MWA shall continue in full force and effect
    until repealed”).
  • Pay an employee 1.5 times their hourly rate for every hour worked over 40 hours. § 50-4-22(D).

Current Minimum Wage Rates
Federal: $7.25/hr.
State: $7.50/hr. (until December 31, 2019)

Statewide Minimum Wage Increases
– January 1, 2020: $9.00/hr. § 50-4-22(A)(2)
– January 1, 2021: $10.50/hr. § 50-4-22(A)(3)
– January 1, 2022: $11.50/hr. § 50-4-22(A)(4)
– January 1, 2023: $12.00/hr. § 50-4-22(A)(5)

Tipped Rate Wage Increases
– Current: $2.13/hr. § 50-4-22(D)(1)
– January 1, 2020: $2.35/hr. § 50-4-22(D)(2)
– January 1, 2021: $2.55/hr. § 50-4-22(D)(3)
– January 1, 2022: $2.80/hr. § 50-4-22(D)(4)
– January 1, 2023: $3.00/hr. § 50-4-22(D)(5)

RULE: Tipped workers must receive at least the hourly minimum wage. This means that, if for a pay
period, their tips do not make up the difference between the hourly rate at the regular statewide
minimum wage, the employer must make up that difference. § 50-4-22(D)(6)(“tips combined with
employer’s cash wage shall not equal less than the minimum wage rate as provided for in Subsection
A of this section.”

RULE: Tip pooling allowed only for wait staff. § 50-4-22(D)(6)(“nothing in this section shall prohibit the
pooling of tips among wait staff”).

Local Minimum Wages
Albuquerque, Albuquerque Minimum Wage Ordinance, §§ 13-12-1 through 13-12-6:

  •  Starting Jan. 1, 2019, the minimum wage will be $9.20/hr.;
  • If the employer provides healthcare and/or childcare benefits to the employee during any pay
    period and the employer pays an amount for these benefits equal to or in excess of an
    annualized cost of $2,500.00, then the minimum wage is $8.20/hr.;
  • Starting Jan. 1, 2019, tipped rate is $5.50/hr.

Bernalillo County, Minimum Wage Ordinance, Sec. 2-218 through 2-223:

  • As of Jan. 2019, the Bernalillo County min. wage is $9.05/hr.;
  •  Applies to work performed in unincorporated areas of Bernalillo County, i.e., outside city
    limits;
  • Tipped rate is $2.13.

City of Santa Fe Living Wage Ordinance, § 28-1 SFCC 1987:
As of March 1, 2019, $11.80/hr.;

  • Tipped rate is same as regular rate but for workers customarily earning over $100/mo. in tips,
    employers can claim tip credit but must make up difference between tips received and
    minimum wage;

Santa Fe County

  • As of March 1, 2019, 11.80/hr.;
  • As of March 1, 2019, tipped rate is $3.53 (known as the “base wage.”)
    – Las Cruces, Minimum Wage Ordinance 14-60 through 14-66:
  • As of Jan. 1, 2019 – $10.10/hr.;
  • Tipped MW: 40% of regular MW or $4.04/hr. ($10.10 x 40% = $4.04).

Secondary School Students
– May pay $8.50/hr. to any student “regularly enrolled in secondary school;”
– Work must be after school or when school is not in session;
– Students working in “tipped” jobs get paid according to tipped minimum wage provisions;
– Child Labor Act provisions still apply to any students covered by CLA, and the overtime provisions
of the MWA do not apply to the student. § 50-4-22(B).

Domestic Service Changes
– SB 85 Removed exemption from MWA for “individual[s] employed in domestic service in or about
a private home” that formerly existed under § 50-4-21(C)(1).
– Effective June 14, 2019, domestic servants in private homes must be paid applicable hourly wage
plus overtime. § 50-4-22(E).

COMMON PITFALLS

– Failing to keep and maintain records required by § 50-4-9 and § 50-4-16.
– Failure to pay final wages that are due an employee upon separation, whether the separation is a quit or a
discharge, in accordance with the deadlines set by the WPA. Those deadlines are:
when an employee is fired, laid off, or terminated: within 5 days after they are fired, laid off or
terminated. § 50-4-4(A)(exception: when compensation is based on task, piece, commission or
other method of calculation, in which case the wages must be paid within 10 days of discharge).

  • when an employee quits: all wages are due at the next succeeding payday. § 50-4-5.
  • If employee quits due to nonpayment or late payment of wages, this may be deemed a
    “constructive discharge,” in which case, wages are due within 5 days.
    – Ignoring “first letter” and/or subpoena that LRD sends in connection with wage claim or investigation.
    Ignoring LRD’s requests for information are violations of the wage statutes and can be prosecuted
    criminally. § 50-4-17.
    – If you fail to keep, maintain or produce, upon LRD’s request, the required records, LRD will determine
    how much you owe based on the employee’s records or recollection:
  • “It is the employer’s burden to maintain true and accurate time and pay records for all
    employees. Therefore, upon a finding by the LRD of an employment relationship, if the employer
    has not maintained and produced to the LRD the wage and hour records required by law, or if the
    LRD determines that employer records are inaccurate or incomplete, the LRD will calculate the
    wages due to the wage claimant based on employee records or the employee’s credible
    recollection of the hours worked and wages paid or unpaid.” 11.1.4.115 NMAC.

– Using a separate bank account to pay employees that is not part of the normal payroll account or payroll
system. This will lead to inaccurate wage and hour records and, in most cases, WPA & MWA violations.
Employers must ensure to keep, maintain, and provide true and accurate pay records for all employees
and payments.
– Hoping that an LLC or corporation will shield you from personal liability for unpaid or underpaid wages.
Persons and individuals may also be held liable as employers for wage debts owed to workers.
– Retaliation: discharging, demoting, denying promotion to or in any way discriminating against a person
with respect to the terms and conditions of employment in retaliation for the person asserting a claim or
right pursuant to the MWA or assisting another person to do so or for informing another person about
employment rights or other rights provided by law. § 50-4-26.1.
– Hoping it is a defense to any action brought under the wage statutes that the complainant is an
undocumented worker. It is not. § 50-4-8(C).
– Taking unauthorized or unlawful “deductions” from employee earnings, including for broken or missing
business property: It is unlawful to settle disputes by deducting amounts from an employee’s paycheck.

ENFORCEMENT

– LRD investigates all claims of nonpayment and underpayment of wages.
– Employers and employees have an opportunity to settle claims during this process.
– Violation of the MWA can result in 200% liquidated damages, plus interest and a misdemeanor
conviction. § 50-4-26(A) & (C).
– Failure to pay terminated employee by the above deadlines means the employee is entitled to damages in
the amount of their regular rate of pay calculated from the date of termination until the day it is paid, up
to sixty days from the date of discharge. § 50-4-4(C)(note: employee must make “demand” for final pay
within a “reasonable time.”) This can also result in a misdemeanor conviction.
– LRD can conduct site visits at place of employment:

  • “The labor commissioner [director of the labor and industrial division] and his authorized
    representatives shall have the right at all reasonable times to inspect such records for the purpose
    of ascertaining whether the provisions of this act are complied with.” § 50-4-49(B);
  • “[E]mployer records “shall be open at all reasonable hours to the inspection of the state labor
    commissioner [director of the labor and industrial division], his agents or agent, record of which is
    required to be kept as herein provided for.” § 50-4-16 (emphasis added).
    – “Any interference with the labor commissioner [director] or his authorized representatives in the
    performance of their duties shall be deemed a violation of this act and punished as such.” § 50-4-49(C).
    – It is a violation of the MWA for an employer not to post a summary of the MWA in the place of
    employment: “Every employer subject to the Minimum Wage Act shall keep a summary of it, furnished
    by the labor commissioner [director of the labor and industrial division] without charge, posted in a
    conspicuous place on or about the premises wherein any person subject to the Minimum Wage Act is
    employed, and the summary shall clearly and conspicuously set forth the current minimum wage.” § 50-4-
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