Small business owners now have additional wage and hour concerns that need to be addressed in deciding where to open for business in New York City. The minimum wage could be higher right across the street.
On Tuesday, September 30th, New York City Mayor Bill de Blasio signed an Executive Order which expands the “living wage” requirements for real estate projects that receive $1 million or more in New York City subsidies. Previously, only direct recipients of City subsidies in excess of $1 million had to pay the “living wage” to their employees. The September 30th Executive Order greatly expands this requirement beyond the direct recipients. Now tenants, subtenants, leaseholders, subleaseholders, and concessionaires of buildings/properties that receive at least $ 1 million in City subsidies on or after September 30, 2014 will also have to pay the “living wage” to their employees. The Executive Order does not impact buildings/properties that received such subsidies prior to September 30, 2014. Further, the executive Order will also not apply to certain residential properties that provide 75 or more “affordable units,” manufacturers, or businesses with less than $3 million in gross income.
Businesses that take space in subsidized buildings/properties will now be required to pay a minimum wage of $13.13 per hour for employees who are not offered health care, and $11.90 for employees that are offered health care. These wage levels are expected to increase every year. This Executive Order will have the greatest impact on restaurants, bars and retailers that take space in the major developments substantially raising labor costs for such businesses which have a large number of minimum-wage or near-minimum wage employees. Moreover, the regulation permits private causes of action, which can include punitive damage awards and attorney’s fees, against businesses that violate these higher minimum wage requirements.
The Executive Order creates significant concerns as to how the order’s directives will be implemented. Oversight of the implementation will be handled by the Department of Consumer Affairs, whose mission and training has not been in labor relations, wages or the workplace. These concerns include how prospective tenants will be placed on notice of the new increased wage requirements, who will be responsible for violations of the regulation, and how does this regulation impact other labor issues such as tip and meal credits, which are currently permitted under federal and state law, and collective bargaining agreements.
As a result of this new Executive Order, small businesses will again be asked to bear heavier and heavier burdens. The small business owner will now need to think long and hard about where to open for business in New York City. Thus, giving new meaning to the familiar real estate mantra: location, location, location.