Last year, under the direction of Governor Andrew Cuomo, the state Department of Labor held a series of hearings to explore ending the tipped wage credit—a law that allows employers of tipped workers to pay a lower base wage and count tips toward a worker’s minimum wage. At half a dozen hearings through June of 2018 to help determine whether or not to change the state's two-tiered wage system, the department heard from workers calling for a higher base wage, and from restaurant industry executives worried about added costs.
Supporters were heartened to hear the governor supporting a policy that aims to benefit New York’s tipped workers, many of whom are women and low-income. But since then, the department has gone silent.
Jill Aurora, Director of Communications for the Department of Labor, wrote in an e-mail this week that “we are still reviewing the testimony and formulating a recommendation.” By state law, the Labor Commissioner has the authority to change the tipped wage in the hospitality industry through regulations without any action from the legislature, and the wage board can enact recommended changes after taking public comment.
Patricia Smith, former New York Labor Commissioner and solicitor of labor under President Barack Obama who now works for the National Employment Law Center, testified in June that the two-tiered wage system is “unnecessarily complex” and makes enforcing wage theft violations difficult.
As for the wait on the DOL, Smith told Gothamist on Thursday, it’s “time for the decision to be made.”
The legislature is currently considering its own attempt to repeal the two-tier wage system. Assembly Bill A1240 would effectively eliminate the tipped wage in the city and in Nassau, Suffolk, and Westchester counties. The tipped wage is currently at $10 an hour for food service workers at large businesses in the city, and wages vary across the state by county and industry. The bill would incrementally raise the tipped wage to match the regular minimum wage of $15 an hour by 2023—$12.50 for businesses in most of the rest of the state.
The bill's sponsor, Assemblywoman Ellen Jaffee, said it wouldn’t just benefit workers, but restaurants as well.
“It is essential,” Jaffee said, adding that if restaurants and business owners “are able to have workers that have much more stability, they will have much more stability.”
It’s unclear when the DOL will come out with its recommended changes, and Jaffee said she’s heard no updates on a timeline.
At least ten of the 43 states with tipped minimum wages are considering bills to eliminate the two-tiered system in 2019, and the Raise the Wage Act in the U.S. House of Representatives, which has 201 co-sponsors, would end the two-tiered wage system federally.
Leading the charge is the One Fair Wage campaign, headed by the Restaurant Opportunities Center United, which works with restaurant workers in New York. The campaign argues the current two-tiered system leaves tipped workers vulnerable to a common form of wage theft: employers failing or refusing to pay workers the difference when tips and the base wage don’t add up to the full minimum, as is legally required.
Wage theft is a pervasive problem nationally, and one study in New York City found nearly a quarter of diners and coffee shops reviewed had been sued for wage violations at least once in the last decade. As a result, studies find tipped workers often live in higher rates of poverty compared to other workers.
Marisa Licandro is a tipped worker in the city and works part-time for ROC United running free trainings for service industry workers. She said when a boss has the power to switch you off a weekend shift that makes significantly more in tips than mid-week, or when customers feel emboldened to be inappropriate knowing servers still need their tips, it leaves women in particular—who make up more than 70 percent of tipped workers in the state—vulnerable to abuse.
“That is too much pressure on somebody in their workplace,” Licandro said.
Opponents of eliminating the tipped wage argue these are issues of enforcement. The NYC Hospitality Alliance, which advocates for restaurant owners, argues that bosses who refuse to pay workers should be punished, and issues like sexual harassment can be handled with better trainings and enforcement. Another bill introduced this year in Albany, Senate Bill S3815, would allow counties to opt out of any changes to the tipped credit.
Andrew Rigie, Executive Director of the Hospitality Alliance, said the proposed change to the tipped credit “raises huge concerns” for businesses and contributes to slower job growth.
“If we start looking at the complexity of each issue on its own and address them, we’re going to be more effective,” he said. “But if we eliminate the tipped credit, it’s going to put huge financial pressure on small businesses.”
There are examples of New York restaurants that have struggled with the added labor costs as the tipped wage has increased the past couple of years, and it’s unclear exactly how businesses would be affected if the entire state did eliminate the tip credit. However, UC Berkeley labor economist Sylvia Allegretto said that considering how volatile the restaurant industry is, it’s also hard to blame higher wages when a restaurant closes.
“There’s always restaurants coming and going, but people love to home in on one or two restaurants that might be shutting down around the time a minimum wage increases,” she said.
Allegretto, co-chair of the Center on Wage and Employment Dynamics at UC Berkeley, wrote a paper on what would happen if New York eliminated the tipped wage. She wrote that increased labor costs can be offset by lower staff turnover and training costs as workers are more likely to stay in better-paying jobs. Plus, she noted, the seven states that already have a one-tiered wage system, including California, still have healthy restaurant industries.
The question ultimately comes down to “what kind of society you want,” Allegretto said. “Who do you want to pay the wage bill?”