Tipped Consequential: Wage Regulation for NYC Food Servers Divides the Industry
Paying a fair wage to restaurant workers should be an uncontested idea. When proposals are put forth to raise the wage of restaurant workers, all those affected are in favor. However, when tipping needs to be part of that equation it leads to a division in opinion even among workers in the same location.
Last month Washington D.C. passed Initiative 77, which effectively eliminates tipped credits and gradually increases the minimum wage for tipped employees to $12.50 and up to $15 by 2026. This measure will need passing by the D.C. Council, who at last check opposed it by a count of 7-6.
What does this mean for New York?
Governor Andrew Cuomo (D-NY) ordered a series of hearings and research into the possibility of eliminating tip credits and tipped wages for the close to 400,000 New Yorkers who depend on them. This means that business would no longer get a credit for the tips employees receive to make up the difference between the current $8.65 tipped wage and $13 minimum wage in the city.
The State Labor Department held seven hearings on the matter throughout the state and the five boroughs. They collected more than 40 hours of testimony and hundreds of written commentaries by workers and businesses who support or oppose the end of the separate wages for tipped classifications.
The New York City Hospitality Alliance, an industry association comprised of restaurant owners and workers, opposes the elimination of tip credits. In response to the passing of Initiative 77 in D.C., Andrew Rigie, the association’s Executive Director, pointed out that “many of the tipped workers who were very vocal and very organized and opposed the tip credit (in DC), don’t live in the district to be able to vote.” The measure passed by a vote of 55% but with only 17% of the voting public reaching the polls.
Catherine Barnett is the Director of Restaurants Opportunities Centers United’s New York office. Her organization has a mission; “To improve wages and working conditions for the 14 million people who work in America's restaurant industry.” They provide training by engaging workers, employers and diners with advocacy and education. Barnett says that the passing of Initiative 77 is a “wait and see” moment. She continues to explain that “voter turnout was little, but media coverage you’ve seen in the D.C. area was pretty big. Big enough that I think some customers were confused about whether it passed or didn't pass, whether they should tip or not.”
The fear by some tipped workers is that the passing of a bill to end tip credits will eliminate tipping all together. This means that employees who depend on the higher wages will no longer receive the additional tips by their customers. More importantly tipped workers argue that businesses who already operate on thin profit margins will be forced to cut labor costs and possibly close altogether due to the additional wages. Pointing to this potential decrease in wages overall Rigie says:
“In New York City the tip wage by the end of this year is going to be $10 an hour. So, our typical wage is higher than many states minimum wage. And according to our data… more than 14,000 tipped workers in New York City are making more than $25 an hour.” Andrew Rigie, Executive Director NYC Hospitality Alliance
Ms. Barnett responds on the other hand that “there are already seven states, including California which is most comparable to New York, where there already is one standard minimum wage. Jobs have not evaporated; the industry has actually grown, and tipping rates have actually increased”
Another point made by those opposed to tip credits is that businesses exploit the ability to take advantage of the law and do not make up the difference between the minimum wage and the earned incomes of tipped workers. Rigie says,
“I don't know how often that's happening one and two, if you're telling me now, instead of having employers pay $8.65 cents an hour you're going to force them to pay $15 an hour you think they're magically going to start complying with the law? Of course, they're not. The damages are just going to be bigger. If there's a problem right now for those employees to collect the money, then let's focus on enforcement”
Proponents of the elimination of tipped credits and separate wages for tipped employees point to studies that sexual harassment and racial discrimination are more prevalent due to tipping practices. Both ROCUnited and the NYC Alliance conduct training to support anti-sexual harassment behavior and compliance. In response to studies by the likes of Dr. Michael Lynn in the Journal of Social Psychology that point to racial discrimination among servers Rigie says,
“If you're talking about the (tip) credit and harassment, government data shows that states like New York, where there is it tip credit, actually had less harassment complaints then states like California where there is no tip credit.”
Rigie accepts that “whether you're in entertainment or restaurants or walking down the street, people are subjected to this disgusting behavior and we need to eliminate it.”
On the other side, Barnett argues that
“ROC reported long before there was a main stream consciousness as #metoo, back in 2014, on the high rates of sexual harassment that exist in the industry.” Catherine Barnett, Director of ROCUnited's New York Office
She does accept that “there is no one industry that has zero or no sexual harassment.”
The Department of Labor for New York has compiled all the research documents and will be constructing a recommendation for Albany to consider. The future of wage regulations affecting the restaurant, nail services and car wash employees who depend on tips will be based on suggestions for legislation and further lobbying. "With the volume of materials to be analyzed, it is too soon in the process to discuss any sort of timeline for the release of the recommendations or their implementation," said Jill Aurora, the department's spokeswoman. There is currently no specific timeline for the conclusion of the department’s findings.