New year to bring changes in minimum wage, workers' comp
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Some of the biggest changes in New York labor law in years are right around the corner, with broad ramifications for Long Island workers and companies.
The new year -- and the cusp of the new year -- will usher in revisions to the state minimum wage, unemployment benefits and workers' compensation. Neither employees nor employers are likely to be happy with all the changes.
Although the minimum wage will go up for the first time since 2009, putting more money into the hands of more than 100,000 low-wage Long Island workers, laid-off employees will find it more difficult to qualify for unemployment benefits. Employers are projected to save money under workers' comp reform, but they will pay higher fees to replenish the unemployment insurance fund, which is $3.9 billion in the red after years of stubbornly high unemployment rates.
Here's a closer look at the upcoming changes.
On Dec. 31 the minimum wage, in the most contentious of the labor law changes, will rise to $8 an hour from $7.25. And the minimum will rise on the same date for the next two years before ending at $9 an hour in 2015.
The increase in the mimimum wage to $8 an hour will affect 104,800, or 7.7 percent, of working Long Islanders, directly or indirectly, said James Parrott, deputy director and chief economist at the Fiscal Policy Institute, an Albany-based think tank. (The institute tabulated local data using statewide numbers from the Economic Policy Institute, a Washington think tank.)
Those directly affected will see their wages rise to the new minimum, Parrott said. The indirectly affected, who typically earn up to $1 an hour more than minimum wage, will most likely see their pay rise when the new rate kicks in.
Even more workers will benefit from the minimum wage increase in the state and in New York City, where 8.9 percent and 9.5 percent of employed residents, respectively, will be affected.
The timing couldn't be worse, said a business-group executive and a local economist.
"While it is being phased in over three years, it still equates to a 20 percent increase in labor costs over that time in a sputtering economy," said Mike Durant, New York State director for the National Federation of Independent Business, the largest U.S. industry group representing small businesses.
Irwin Kellner, the Port Washington-based chief economist for MarketWatch.com, a financial website, said the increase could stymie job growth. "The effect of this increase will be to make it more difficult for entry-level workers to find jobs or retain jobs," he said.
But Charlene Obernauer, executive director of Long Island Jobs With Justice, a grassroots group that lobbied for the higher pay, said the increases fall short of wages needed to live on the Island, and she worries because the increases aren't indexed to inflation.
"We are going to have this same fight again in a couple of years for another minimum wage increase," she said.
On Oct. 6, laid-off workers will see their unemployment benefits climb to a maximum of $420 a week, from $405. This will be the first increase since 2000. (The state will still lag its neighbors. New Jersey's maximum payment is $624 a week, and Connecticut's is $590.)
But new regulations that take effect Jan. 1 will make it tougher for jobless workers receiving severance payments from their employers to qualify for unemployment benefits.
Current rules don't cap severance and allow laid-off workers to collect jobless benefits and severance simultaneously, as long as the severance isn't structured like a wage payment that employees receive until they find another job.
Under the new regulations, jobless workers won't qualify for benefits while they receive severance pay that exceeds the maximum weekly unemployment benefit amount.
For lump-sum severance payments, the Department of Labor will determine how many weeks of regular wages the severance would cover. So if a worker received, say, a $5,000 severance payment and regularly earned $1,000 a week, he or she would be ineligible for unemployment benefits for five weeks because the $1,000 exceeds the maximum unemployment benefits payment.
"After Jan. 1 you won't be able to collect unemployment benefits if the severance is more than the maximum benefit rate," said employment attorney Robert Lipman of Lipman & Plesur in Jericho. "To me that is the biggest change."
Companies' unemployment insurance taxes will rise on New Year's Day to replenish the unemployment insurance fund. They are now assessed from 1.5 percent to 9.9 percent on employees' first $8,500 of wages. That wage base will climb to $10,300 and will rise every year on Jan. 1 until 2026, when the base will top out at $13,000. (By contrast Connecticut's max wage base is $15,000, and New Jersey's is $30,900.)
Insolvency is the driving force behind the revamp of the unemployment insurance program. New York borrowed from the federal government to cover the cost of benefit payments, which soared during the recovery and left the state fund insolvent.
The state Labor Department estimates that reforms, such as more restrictive benefits standards, will save employers $400 million statewide over 10 years, including $60 million on Long Island.
Durant of the state business group praised the initiatives, despite the higher initial costs for employers.
"While costs will be higher the next two to three years, there are reforms that will have a positive impact for small business such as anti-fraud measures and stricter language for who may qualify for benefits," he said.
But Rob Basso, president of Advantage Payroll Services in Freeport, whose clients include small businesses, said the higher taxes will hurt.
"You either have reduced profits or you have to increase your rates to your customers," he said.
The cost to companies of state workers' compensation insurance will fall next year.
New York employers are required to buy workers' comp insurance or have a self-insured program. On top of those premiums, they pay a surcharge to New York State to help fund the workers' compensation system.
Starting Jan. 1 the surcharges will drop to 13.8 percent of their insurance premiums, from 18.8 percent.
Earlier this year the minimum weekly benefit was increased to $150 from $100. The maximum benefit paid still depends on an employee's salary and degree of disability.
The state's focus has been on streamlining the program to make it less expensive. It has closed the so-called "Reopened Case Fund," where a lot of old cases linger, and estimates that will save businesses $300 million a year. The state also estimates a one-time $500 million in savings as it standardizes "the antiquated, disjointed and overly complicated system" used to calculate employers' assessments. Employers sometimes received as many as 16 bills a year for assessments, the Workers' Compensation Board said.
The response from businesses has been positive.
"The governor's reforms to lower the costs of workers' compensation insurance premiums should result in meaningful savings for most businesses, and thus improve the overall business climate for our region," said Kevin Law, president of the Long Island Association, the region's largest business group.
With Matt Clark