Elimination of the tip credit?

By The NYC Hospitality Alliance

December 18, 2017

As you may have heard, NYS Governor Andrew Cuomo announced that he will hold hearings in 2018 on the minimum wage for tipped workers because he doesn’t think the current system is working well.

Some media outlets are reporting this as an implication that the governor will seek to further reduce the tip credit or effectively eliminate it.

Restaurant employers are allowed to take a credit against a worker’s wages when their base wage and tips equal or exceed the state’s minimum wage, which will soon be $15. If a worker’s base wage and tips equal less than the minimum wage, an employer is required by law to pay the difference.

A 2014 survey conducted by the NYC Hospitality Alliance that comprised nearly 14,000 tipped restaurant workers in the city found that the average base wage, plus tips equaled an hourly wage of $25.34. Since that time, the governor’s Department of Labor increased these workers’ base wage by more than 50%. Restaurants have also increased their menu prices to cover this and other rising costs. The higher menu prices have increased the amount of the average check, thus raising the gratuity left by customers who leave a tip based on a percentage of their total bill. The tip percentage left by customers often ranges from 18% - 22%. This move has many observers concerned that it will not only deal a blow to local businesses but will further exacerbate the disparity in wages earned between tipped workers and their colleagues who work in the kitchen and are prohibited by law to participate in a restaurant’s tip pool.

The Governor and Department of Labor have not scheduled dates for the tip credit hearings nor provided specific details. The NYC Hospitality Alliance will monitor this issue closely and bring you updates as they become available.

The NYC Hospitality Alliance has already been actively opposing efforts at the legislative level to eliminate the tip credit over the past year. You can read our official opposition memo by clicking below.

Read Transcription of PDF MEMORANDUM OF OPPOSITION - S4405 - A6203

NYC!HOSPITALITY ALL I ANCE MEMORANDUM OF OPPOSITION S4405 (Stewart-Cousins) / A6203 (Jaffee) Eliminates the tip wage for food service workers The New York City Hospitality Alliance — representing restaurants, bars, destination hotels and industry suppliers across the five boroughs — strongly opposes S4405/A6203, which would eliminate the tip wage for restaurant servers and other food service employees. • First and foremost, this bill is predicated on a rhetorical fallacy, that tipped workers earn a "sub-minimum wage." This is absolutely untrue, as every employee — tipped or non-tipped — is required by law to receive the legal minimum wage in New York State. If an employee's base wage plus tips do not equal or exceed the state minimum wage, the employer is legally mandated to "make up the difference" to ensure the employee receives the full legal wage. If an employee does not receive this legal minimum the employer is breaking the law and the issue is one of enforcement by the NYS Department of Labor, not the law itself. There simply is no such thing as a "sub-minimum wage" in New York and it is rhetorically unfair to describe this legal payment structure — which was approved by a NYS Wage Board — in such a manner to try and achieve a political or policy change. • Furthermore, the longtime financial structure of the New York restaurant industry — which was obviously built with the tip credit as a key part of a restaurateur's financial projections — would be dramatically impacted by such a drastic change. Restaurants in NYC currently operate on exceedingly thin margins (often in the low single digits) and are faced with major financial challenges, including commercial rents that have doubled, tripled or quadrupled; new mandates on paid sick leave and other benefits; and an increased minimum wage, tip wage and overtime exempt salary already. The complete elimination of the tip wage would result in significant job loss, both from restaurant closures as well as the obvious need to reduce service staff. • Contrary to the claim, eliminating the tip credit does not eliminate the onus on employers to keep accurate records and follow the law because they still need to keep detailed records about their employees to ensure that tip pools are properly organized and maintained. • Numerous restaurants would likely eliminate tipping altogether, which will result in the dramatic reduction in earnings by thousands of currently tipped workers in New York (in fact, a 2014 survey of hundreds of restaurants by the NYC Hospitality Alliance found that the average restaurant server makes in excess of $25 per hour — a number that obviously would be completely unsustainable under this legislation). Wage and hour issues are taken seriously by the NYC Hospitality Alliance and our members and we will continue to work collaboratively with the NYS Department of Labor to ensure that existing laws and regulations protect employees and employers and are effectively enforced. Again, the issues that 54405/A6203 seems to seek to address are issues of enforcement and not policy, and so for all of the above reasons the NYC Hospitality Alliance strongly opposes this legislation. ABOUT THE NYC HOSPITALITY ALLIANCE The New York City Hospitality Alliance is a broad-based membership association founded in 2012 to foster the growth and vitality of the industry that has made New York City the Hospitality Capital of the World. It is the first association ever formed in New York City representing all facets of this diverse industry: restaurants, bars, lounges, destination hotels and major industry suppliers. Advocating on behalf of our members at all levels of government, The Alliance supports pro-growth public policy, encourages investment in and promotion of NYC's hospitality industry, and evaluates the development, implementation and fairness of relevant government regulations. Should you have any questions about the NYC Hospitality Alliance's position, please call Executive Director Andrew Rigie at 646-532-2756 or our lobbyists, Yoswein New York, Inc., at 212-233-5700.

{ join our }