Everything you need to know about New York’s proposal to eliminate the tip credit
You’ve heard a lot about tipping this year. At the federal level, the Trump administration tried—and failed, after overwhelming criticism—to give owners and managers the ability to pocket gratuities from a restaurant’s tip pool.
That storm may have settled for the moment, but another is brewing in New York state, where Democratic Governor Andrew Cuomo is considering eliminating the tip credit.
When a restaurant owner takes a tip credit, they’re taking advantage of a federal minimum-wage provision that allows them to pay their workers a wage as low as $2.13 an hour, so long as tips bring their take-home pay back up to the federal or state minimum wage, whichever is higher. The federal minimum wage is $7.25.
Some restaurant workers and advocacy groups have been critical of the tip credit, pointing to it as one dysfunctional part of the larger culture of tipping, which they say can allow sexual harassment to flourish. They argue that diners can more easily harass workers who won’t retaliate for fear of losing tips. According to the non-profit labor advocacy group Restaurant Opportunities Center United (ROC United), restaurant servers—a group made up predominantly of women—are more likely to endure harassment and abuse from customers, since their livelihoods depend on the tips they earn. Cuomo cited data from a ROC United report on sexual harassment in the restaurant industry in his tip credit proposal, which he unveiled at this year’s State of the State address.
Last year, Buzzfeed published an analysis of 20 years of federal sexual harassment data. Of over 170,000 complaints filed to the Equal Employment Opportunity Commission (EEOC) between 1995 and 2016, workers in full-service restaurants filed the largest share of those claims—more than 10,000.
Seven states have already eliminated the tip credit: Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington, as has the U.S. territory of Guam.
In 2016, Maine residents voted by referendum to eliminate the tip credit in the state, much to the dismay of the state’s restaurant servers, who campaigned and rallied their elected officials to re-institute the provision. Republican Governor Paul LePage ultimately signed the tip credit back into law last year.
This legislative boondoggle points to a philosophical schism in the community of restaurant workers.
Joshua Chaisson, a server and co-founder of Restaurant Workers of America, a workers’ group that advocates for retaining the tip credit, argues that the alternative—raising the minimum wage for restaurant workers—effectively reduces their overall take-home pay and prompts employers to cut working hours in order to absorb the cost increase.
“In Maine in 2016, when the referendum passed that would have eliminated the tip credit, and subsequently raised the minimum wage, we had a number of guests coming in across the state to different establishments, saying to servers, ‘You get paid the full minimum wage. You still think I should leave 20 percent?’” Chaisson told me by phone. “We know ultimately that this will kill our jobs and cut our earnings off.”
Chaisson also said that the rising trend of service charges—where tips are eliminated altogether and a flat fee is levied on the bill instead—would ultimately hurt workers, who do not have control or ownership of service charges, as they do tips.
“Service charge funds, technically—by definition—are property of the owner. As a result, that ownership uses whatever percentage out of that service charge to counter the higher labor costs.”
A rundown of this workforce-dividing issue: Some worker groups want to preserve the tip credit, arguing that without it, restaurant costs will rise and workers will ultimately get cut. Other workers take that same stance, fearing that the tip credit will reduce their take-home pay. But a third cadre of workers see the tip credit as a mechanism through which diners can more easily exert abuse or harassment, one that should be removed from the dining room table.
Have an opinion? You can make it known at one of a number of hearings around New York over the coming weeks. The full schedule of them can be found here.