Employers in New York currently are permitted to pay tipped workers a direct cash wage that is below the State minimum wage and take a “credit” for some of the tips received by employees to satisfy the difference between the cash wage paid and the full minimum wage.  For example, in New York City beginning in 2018, servers for large employers (those with 11 or more employees) may pay servers a direct wage of $8.65 per hour and take a $4.35 per hour credit for tips received by employees (so long as the employees receive at least $4.35 per hour in tips).  Combining the two equals the 2018 NYC minimum wage rate for large employers, $13.00.  But all of that may be coming to an end if New York Governor Andrew Cuomo gets his way.  Today, Governor Cuomo announced that, as part of his upcoming State of the State address, he plans to direct the New York Department of Labor (NYDOL) to schedule public hearings to evaluate the possibility of ending minimum wage tip credits in the State.  This is not the first such challenge to the continued use of the tip credit.

If this change is made, tipped workers will have a big boost to their income and employers a big blow to their bottom line. Employers will be required to pay servers and other tipped employees the full minimum wage and such “front of the house” workers also will be entitled to keep the tips they receive on top of the direct wage.  Such a move will widen the already large gap between the front of the house workers (e.g. servers) and “back of the house” employees (e.g. cooks) who, under New York law, do not and cannot receive any tips.  Notably, the federal DOL has issued proposed regulations that would permit employers who do not take tip credit to share tips with employees in the kitchen to address the income inequality.  But without some other change to NY law expanding the group of employees permitted to share tips, service staff would get to keep it all, on top of their proposed wage increase, as the elimination of the credit is, in effect, a substantial wage increase.

In reaction to the increased labor costs imposed on business by the rising minimum wage and shrinking tip credits, some restaurants have eliminated tipping altogether, a trend that might accelerate if tip credits are eliminated.  Those who oppose tip credits argue that tips no longer serve as a bonus for good service, but instead often only bring the workers’ wages up to the legal minimum.  Governor Cuomo’s announcement also points to studies that show African-American employees often are tipped less than their white co-workers and that workplaces using the tip credit have a higher rate of sexual harassment.

As it recently did with respect to predictive scheduling, the NYDOL will hold public hearings to solicit input from workers, businesses and other interested parties, and likely will receive testimony from pro-employee and pro-employer groups.  An eventual decision by the NYDOL to eliminate the tip credit would have a significant impact on those industries where employees rely heavily on tips.

Please contact Jackson Lewis with any questions about tip credits or any other wage and hour compliance issue.

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Photo of Richard I. Greenberg Richard I. Greenberg

Richard Greenberg, a Principal in New York City office of Jackson Lewis P.C., is admitted to the bar of the State of New York and the Federal District Court for the Southern District of New York. Mr. Greenberg graduated from Cornell University’s…

Richard Greenberg, a Principal in New York City office of Jackson Lewis P.C., is admitted to the bar of the State of New York and the Federal District Court for the Southern District of New York. Mr. Greenberg graduated from Cornell University’s School of Industrial and Labor Relations in 1992 and earned a Juris Doctor degree from Brooklyn Law School in 1995.

He advises both unionized and union-free clients on a full-range of labor and employee relations matters. With respect to traditional labor matters, Mr. Greenberg represents clients in collective bargaining negotiations, labor disputes, grievances and arbitrations, proceedings before the National Labor Relations Board, and in state and federal court. Mr. Greenberg also advises clients on the legal aspects of remaining union-free. With respect to employee relations matters, Mr. Greenberg has extensive experience assisting clients in numerous industries with the development and maintenance of personnel policies and personnel infrastructures. In this regard, Mr. Greenberg often works on these issues with clients as business needs and culture change as a result of business transactions, such as mergers and acquisitions.

Mr. Greenberg regularly advises clients on compliance with the myriad of federal and state employment laws, including the FMLA, FLSA, ADA, ADEA and WARN, as well as new legal developments impacting labor and employment policies and practices.

Photo of Noel P. Tripp Noel P. Tripp

Noel Tripp is a Principal in the Long Island office of Jackson Lewis P.C., one of the largest law firms in the United States devoted exclusively to representing management in labor and employment matters. Since joining Jackson Lewis P.C. as a summer associate…

Noel Tripp is a Principal in the Long Island office of Jackson Lewis P.C., one of the largest law firms in the United States devoted exclusively to representing management in labor and employment matters. Since joining Jackson Lewis P.C. as a summer associate in May 2005, he has practiced exclusively in employment law and has been involved in matters pending before federal and state courts and administrative agencies covering the gamut of employment-related matters from discrimination and workplace harassment to wage/hour disputes and affirmative-action compliance. His principle focus is the defense of class and collective action lawsuits under federal and state wage-and-hour laws.

Mr. Tripp is a graduate of Dartmouth College (A.B. 1999), and Fordham Law School (J.D. 2006). Prior to attending law school, Mr. Tripp was a complex commercial litigation paralegal at a large national law firm in Los Angeles, California. He is admitted to practice in the state of New York.

Education

  • Fordham University, J.D., 2006
  • Dartmouth College, A.B., 1999

Admitted to Practice

  • New York, 2007
  • New York – E.D. N.Y., 2008
  • New York – S.D. N.Y., 2008