Will New York Eliminate the "Tip Credit" for Servers?

The minimum wage is not as simple as you might think, at least when it comes to service workers in businesses, like restaurants, where employees receive customer tips. Both the federal government and New York State allow employers to apply a “tip credit” against the minimum wage it must pay employees. In practice, this means that employers only have to pay a sub-minimum wage of just $2.13 per hour so long as the employee's tips bring their average hourly earnings up to the applicable minimum wage, which is $7.25 under federal law (but higher under state and New York city regulations.)

Critics maintain that the tip credit relegates service workers to second-class status under employment law. In a recent editorial, The New York Times said the discrepancy between tipped and non-tipped workers puts the former group “at greater risk of wage theft, sexual harassment and other worker exploitation” because it is far too easy for employers to “withhold or steal tips, especially from workers they don’t like or who refuse their propositions.”

The Times endorsed a proposal made by New York Gov. Andrew Cuomo as part of his recent State of the State address to eliminate the tipping credit, at least as it applies to the state's minimum wage. Last December, Cuomo formally directed New York Department of Labor Commissioner Roberta Reardon to hold a series of hearings throughout the state “to solicit input from workers, businesses and others” on the idea. Echoing the concerns raised by The Times, Cuomo noted that “[m]ore than 70 percent of all tipped workers in New York are women,” leading to significant disparities in income based on gender. Race is also a factor, the governor said, citing studies that show “African-American workers are often tipped less than their white counterparts.”

Of course, not everyone thinks that getting rid of the tip credit is a good idea. In many New York restaurants, tipped employees who work in the front-of-the-house positions already earn significantly more than back-of-the-house workers, such as kitchen staff, who are already paid the full minimum wage. As one longtime restaurant server told a local news station in Buffalo, “To be blunt we would not make the same that we make an hour now,” if the tipping credit went away, “and no restaurant would ever be able to pay any server or bartender that [same] amount.” The owner of another restaurant told the same station that requiring businesses to pay tipped workers the full minimum wage would force her to “increase prices, cut staff, [and] try and look at your budget see where else you can cut.”

Have You Been a Victim of Wage Hour Violations?

As of right now the tipping credit remains the law in New York State. The Department of Labor will continue to hold hearings until at least June in locations around the state. Even if the governor's proposal is adopted, it would likely be phased in over several years.

For now, all New York workers, whether tipped or not, need to understand and stand up for their legal rights. If you have not been paid the wages you are legally owed, you should contact a qualified New York employment attorney as soon as possible. Call the Law Offices of Nisar Law Group, P.C., at 646.760.6493 to speak with a lawyer today.


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