Governor Andrew M. Cuomo recently announced a proposal to direct the New York Department of Labor (NYDOL) to schedule public hearings to examine industries and evaluate the possibility of eliminating wage tip credits in New York State. Currently, New York employers 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 make up the difference between the cash wage paid and full minimum wage.  However, this practice would be prohibited if minimum wage tip credits are eliminated, which might have a significant impact on industries where workers rely heavily on tips.

If the change is made, employers will be required to pay tipped workers the full minimum wage and the workers would also be able to keep tips they receive in addition to that, thus increasing their income. In support of his proposal, Cuomo stated, “At the end of day, this is a question of basic fairness. In New York, we believe in a fair day’s pay for a fair day’s work and that all workers deserve to be treated with dignity and respect . . . There should be no exception to that fairness and decency. I have directed the Department of Labor to ensure that no workers are more susceptible to exploitation because they rely on tips to survive. I look forward to reviewing the findings of these hearings.” The announcement also noted that studies have shown that African-American employees often are tipped less than white co-workers and that workplaces using the tip credit have a higher rate of sexual harassment.

Despite the benefits, the elimination of tip credits may also have the effect of enlarging the wage gap between “front of the house” workers such as servers and “back of the house” employees such as dishwashers and cooks who, under New York law, are not permitted to receive any tips.  Should tip credits be eliminated, restaurants might consider eliminating tipping in total to avoid the substantial wage increase that service staff would receive.

As part of Cuomo’s new proposal, the NYDOL is directed to hold public hearings to solicit input and testimony from employees and businesses, in order to evaluate whether the tip credit should be eliminated. Those who wish to testify will be able to pre-register on the Department’s website and notice will be issued identifying the specific times and locations for the hearings.