Hearings on Eliminating the Tip Credit Wrap Up Across New York State

In December 2017, Governor Andrew Cuomo announced that the New York State Department of Labor would be conducting hearings regarding the elimination of the so-called “tip credit,” which allows workers in predominantly service industry jobs to receive an hourly wage that is below the applicable minimum wage, as long as they receive enough tips so that their take-home pay reaches the threshold of minimum wage. In New York City, for example, the applicable 2018 minimum wage is $13.00 per hour, but restaurants employing eleven or more employees are able to pay their workers a minimum of $8.65 per hour, as long as their employees make at least $4.35 per hour in tips, or the restaurant must make up the difference. There are varying minimum wage rates and allowable tip credits for Long Island, Westchester, and the rest of New York State as well.

At the hearings conducted throughout the state from March through late June, advocates on both sides of the issue spoke out, raising several arguments for and against eliminating the tip credit. Those for its elimination argued that the tip credit often results in wage theft, as employees are not usually aware of what the applicable tip credit is and when their income has fallen beneath that threshold (even though the labor law requires employers to disclose the applicable tip credit and explain its effect to their employees in writing). Further, many cited studies, such as the one performed by the Center for American Progress, that tipped workers are more likely to face sexual harassment due to their dependence on collecting tips.

Advocates speaking against the elimination of the tip credit included both business owners and service workers who worried about the financial implications, for restaurants in particular, if the tip credit were eliminated. Restaurant owners said that they feared the increased cost of paying every employee at least minimum wage would cause them to reduce their workforce or even close entirely. Restaurant workers argued that they actually earned substantially more than minimum wage by receiving tips and worried about the incentive for customers to continue tipping if they knew the employees were receiving minimum wage before tips.

Now that the hearings have finished, Governor Cuomo and the Department of Labor will have to evaluate these issues and determine their next course of action. Check back on our website for any future developments.

Additionally, if you are a tipped employee and believe you have suffered a violation of the tip credit rules and regulations, please contact Borrelli & Associates, P.L.L.C. as soon as possible to schedule a consultation.